TQM, strategy, and performance: a firm‐level analysis

Purpose – The purpose is to examine the role of TQM in a strategy‐TQM‐performance model. More specifically, it seeks to investigate whether TQM has a driving role in the formation of strategy or has a mediating effect in the strategy‐performance relationship. Design/methodology/approach – A survey was used to collect data. The instrument was assessed for its validity and reliability. Structural equation modelling was employed. Findings – TQM influences strategy formulation process and it is a dynamic resource that contributes to the achievement of a sustainable competitive advantage. In addition, soft TQM has a higher impact than hard TQM on competitive strategy formulation and on performance. Research limitations/implications – The model developed and tested can be enriching to the TQM, strategic management, and quality management fields. Future research is recommended to use methods other than self‐report questionnaires and to account for certain behavioral factors that can influence the relationships investigated in the study. Practical implications – The findings provide insights to the need to integrate TQM with the various stages of the strategy formulation process, with an emphasis on the soft elements of TQM, including customer satisfaction, management and leadership, and employee relations. Originality/value – Despite the remarkable contributions of existent research, there is a lack of substantive research that examines the relationship between the hard and soft components of TQM on one hand and the two types of competitive strategy – differentiation and cost leadership – on the other. This gap is filled by this study.