Quality and competitive advantage: an empirical study of ISO 9000 adoption in the electronics industry

Quality and quality related issues have been a topic of research interest in the business field for sometime. Quality management practices are seen as a competitive advantage. The conventional wisdom is that better quality leads to higher revenues, decreases costs, and increased profits. Empirical archival financial studies concerning the link between quality and financial performance have been difficuU because the area of quahty management practices suffers from multiple definitions, varying degrees of implementation, and lack of specific implementation dates. These difficulties limit researchers' ability to examine the cost/benefit relationship between quality management and financial improvements.

This dissertation attempts to overcome some of these research difficulties by focusing on firms that become ISO 9000 certified. ISO 9000 is a quality standard that provides guidelines that are generic and can be applied to any type of organization. Specifically, the effect of ISO 9000 certification on financial performance in the elecfronics industry is examined in this dissertation. Hypotheses and control variables were developed from resource advantage theory and the quality, ISO 9000, adaptive assets, and research and development literatures.

Publicly available financial data was gathered for both ISO 9000 certified and non-certified companies and used to test the hypotheses. Pooled cross-sectional regressions were used in the testing of the hypotheses.

The results of this study were mixed. However, in general they failed to support the major hypotheses. Firms that were ISO 9000 certified (and therefore following a quality management practice) did not have greater financial performance than did firms that were not ISO 9000 certified. Furthermore, ISO 9000 certified firms actually saw their financial performance decline after they became ISO 9000 certified when compared to the financial performance before becoming ISO 9000 certified.