The Relationship Between ISO 9000 and Business Performance

The Relationship Between ISO 9000 and Business Performance: Does Registration Really
Matter?
Author(s): Bret L. Simmons and Margaret A. White
Source: Journal of Managerial Issues, Vol. 11, No. 3 (Fall 1999), pp. 330-343
Published by: Pittsburg State University
Stable URL: http://www.jstor.org/stable/40604275 .
Accessed: 02/08/2013 11:52
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .
http://www.jstor.org/page/info/about/policies/terms.jsp
.
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact support@jstor.org.
Pittsburg State University is collaborating with JSTOR to digitize, preserve and extend access to Journal of
Managerial Issues.
http://www.jstor.org
This content downloaded from 143.88.66.66 on Fri, 2 Aug 2013 11:52:42 AM

All use subject to JSTOR Terms and Conditions
JOURNALOF MANAGERIALISSUES
Vol.XI Number
3 Fall 1999: 330-343
The RelationshipBetweenISO 9000 and Business

Performance:Does RegistrationReallyMatter?*
BretL. Simmons
Assistant ofBusinessAdministration
Professor
ofAlaska,Fairbanks
University
A. White
Margaret
Associate ofManagement
Professor
OklahomaStateUniversity
Atthebeginning ofthisdecade,ac- mated200,000registered sitesas of
ceptanceof the qualitysystemstan- 1997 (Goodman,1998).
dardISO 9000byU.S. companiesap- In fact,ISO 9000 is arguablythe
peareduncertain. In 1992,a surveyof mostinfluentialstandardof itskind
midsizeU.S. firmsby consultants at intheworld.Thisrapidacceptanceof
GrantThorntonfoundthat48% had ISO 9000 suggeststhatmanyfirms
notheardof thequalitysystem stan- findthatthestandardis wellwritten
dardISO 9000,and only8% planned and worthobserving, in spiteof the
tobecomecertified bytheendofthat factthatthereis no compellingevi-
year.The surveyalso revealedonly dence thatthestandardis ultimately
11% ofthosecompaniesthought ISO good or bad (Uzumeri,1997). The
9000 wouldaffectthemmuchat all theoryimplicitamongpractitioners
Journal1992). Fouryears
( WallStreet thatISO 9000can contribute tocom-
later,a similarsurvey bythesesame advantagehas attracted
petitive little
consultantsdiscoveredthat by the interestfromresearchers. Yet many
end of 1998,52% of all midsizeU.S. firmsareincreasingly
questioning the
manufacturers planned to be ISO linkbetweenISO 9000 and business
9000 certified{Wall Street Journal performance. Does the size of the
1996). This unexpectedturnaround firmaffectthebenefitsobtained?Do
in favorofISO 9000is notuniqueto firmsthatare committed to interna-
the U.S. Worldwide, the numberof tionalmarketsor exportextensively
ISO 9000companieshasgrownfrom benefitmore thanfirmscompeting
a mere handfiilin 1987 to an esti- domestically?(Brownetal, 1995).
* The authorswould like to thankKen E. Case, the editor,and twoanonymousreviewersfortheir

helpfulcommentsin the preparationof thismanuscript.
JOURNAL OF MANAGERIALISSUES Vol. XI Number 3 Fall 1999
(330)

The Relationship Between ISO 9000 And Business Performance 331
Does ISO 9000 registrationreally tractreview,and procedures to con-

matter?The purpose of thisresearch trol and verifyproduct design. ISO
is to begin to establishan empirical 9002 differsonly in that it does not
answerto thisquestion. While there addressproductdesign. Certification
has been much published work on thatan organization'squalitysystem
various issues associated with ISO meets the requirementsof the ISO
9000, researchin thisarea has lacked standard is established by an inde-
systematicmeasurementand multi- pendent thirdpartyselected by the
organizationcomparisons.The liter- organization.
ature on ISO 9000 is overwhelmingly The time required for a firm to
either prescriptive or descriptive, achievecertification of one of itssites
withstudiesthat are speculative,an- could range fromsix monthsto two
ecdotal, and oftenbased on the ob- years,butis typicallyaround one year.
servationof only a single company Depending on the size of the plant,
(Ebrahimpour et al, 1997). This thecostto preparea siteforISO 9000
studywillcomparemultiple,objective ranges from $15,000 to $1 million.
performance measures of 63 ISO The typicalcost to preparea medium
companies to 63 non-ISO companies sized plant forISO 9001 is $250,000
in the electronicsindustry.The re- (Peach, 1997; Uzumeri, 1997; Zuck-
sultsobtainedfromthe researchhelp erman,1997). Because ofthetime,ef-
to empiricallyclarifythe value of the fort,and cost required to obtain ISO
ISO 9000 qualitysystemstandard. 9000 certification,along withthepro-
posed organizationalbenefits,thede-
ISO 9000: WhatIt Is, Isn't,And Why cision to pursue ISO 9000 is most
Companies Pursue It likelya strategicone made by the or-
ganization'stop managementteam.
According to ANSI/ISO/ASQC ISO 9000 is mostprevalentin West-
9000-1-1994,theISO 9000 standardis ern Europe where it has its roots.Al-
intended to provide a generic core thoughcompliance withISO 9000 is
qualitysystemthatcan be applied to voluntary, thestandardhas been mar-
a broad range of industryand eco- ketedso thatmanycompaniesbelieve
nomic sectors. As a quality system it is a requirementfordoing business
standard,it is concerned about how in Europe. Indeed, anycompanythat
qualityis managed bya companybut lacks a certificate of compliance
it does not directlyaddress product could be at a significantmarketing
quality (Jacksonand Ashton, 1995). disadvantage if its competitors do
The ISO 9000 standard describes have certification. Juran (1995) be-
whatelementsqualitysystemsshould lieves this perception may be the
encompassbut not how a specificor- mostsignificant reason whytherehas
ganization should implement these been such a rushto become certified.
elements. The standard intends for He also statesthatto be competitive
each organizationto design and im- in the global marketplace,mostcom-
plement a qualitysystemthat works panies mustgo beyondthebasic qual-
for its specific products, processes, ity management systemthat is out-
and practices.The most comprehen- lined byISO 9000.
sive standard, ISO 9001, includes AlthoughISO 9000 is increasingin
managementresponsibilitiesfor the popularity,it is not withoutits skep-
quality system,procedures for con- tics.Officialsof the National Institute

332 and White
Simmons
of Standardsand Technologycon- reasonsthesecompaniessoughtreg-
tendthatthecentralpurposeofISO wasbecausetheircustomers
istration
9000 registration is to enhanceand requireditand becausetheybelieved
facilitate
tradebyreducing auditsand ISO registrationwouldincreaseop-
helpingto ensurebuyersthatspeci- erationalefficiencyand reducecosts
fied practicesare being followed (Struebing, 1996). These resultssug-
(ReimannandHertz,1996). Theybe- a
gest possible shift from havingto
lievethatitisimportant forU.S. firms implementISO 9000 (customers
to recognizethatregistration simply wantit) to wantingto implement it
means conformity to documented (realizethebenefits) as therationale
practices.Reimannand Hertz(1996) forregistration(Wenmoth and Dob-
statethatISO registration does not bin,1994).Thisis important because
necessarily mean the following:1) ISO 9000certification maybe a poor
good or improving productquality, explanatory variableofcustomer sat-
2) productthatsatisfies customer's isfaction et
(Terziovski al.,1995).The
needs,3) comparablelevelsofprod- nextsectionwillconsiderthepoten-
uctqualityamongregistered compa- tial beneficialrelationship between
nies,4) betterqualitythannon-reg- ISO 9000 registration and business
isteredcompanies,or 5) good or performance.
improvingproductivity, responsive-
ness,competitiveness, or workforce BusinessPerformance
and ISO 9000
development.They caution that
whenqualityefforts focusprimarily The conceptual and empirical
on conformity and documentation, foundations forthe generallinkbe-
theremaybe a separationbetween tweenimproved qualityand business
qualitymanagement andoverallbusi- performanceare well established.
ness management.Quality expert Threeprimary authoritieson quality,
J.M.Juran(1995) acknowledges that W. EdwardsDeming (1986), J.M.
thecomprehensive qualitysystem de- Juran (1974), and Kaoru Ishikawa
finedbytheISO standards has a de- (1985), agreed organizationsthat
greeofmerit, butreiterates thatcer- producequalitygoodswilleventually
tificationalone will not enable do betteron traditional measuresof
companiesto attainworld-class qual- suchas profitability
effectiveness than
ity. Apparently, these reservations will organizationsthat attemptto
aboutISO 9000havenotbeen a ma- keepcostslowbycompromising qual-
jor concernforU.S. companies. ity(Hackmanand Wageman,1995).
Severalrecentsurveysrevealthe Improved effectiveness is accom-
mostcommonreasonswhycompa- plishedthrough both an operations
nies seek ISO 9000 certification. A and customer orientation. The oper-
studyof 362 U.S. firmsregistered to ations orientation produces in-
ISO 9000 foundthatthe top three creasedrevenuesthroughenhanced
reasonsforpursuingregistration are and reducedcosts
productreliability
toincreasemarket share,tomeetcus- throughprocessefficiencies, whilea
tomerrequirements, and to improve complementary customer orientation
processefficiency (Ebrahimpouret producesincreasedrevenuesand re-
al, 1997).A smallersurvey of48 ISO duced coststhroughmarketadvan-
companiesin the NewYorkmetro- tage and productdesignefficiency,
politanarea foundthatthe top two (Reedetal, 1996).These
respectively

The RelationshipBetweenISO 9000AndBusinessPerformance 333
linksbetweenqualityand business and Dobbin,1994). Such marketing
performance are established in both advantagesare especiallyimportant
economicmodels (Fine, 1986; Led- forfirmswithan international sales
ererand Rhee,1995) and empirical strategy(Ferguson,1996). Because
studies (Chowdhuryand Menon, thestandardis written to addressar-
1995; Hendricksand Singhal;1997; eas wheregoodbusinesspractices are
Jacobsonand Aaker,1987; Powell, itis considereda goodgen-
essential,
1995). eralguidelineforefficient operations
However, thespecificempirical re- (Arnold,1994). Zuckerman(1997)
lationshipbetweenISO 9000registra- assertsthatthe majorbenefitof the
tion and businessperformance has ISO 9000 standardis the processof
not been established.Studieshave establishinga solid quality base
shownthat ISO companiesexpect withina company.
theirqualitysystems willlead to im- Acceptanceofthisargument iscrit-
provingproductdesign,processde- ical to the conceptuallinkbetween
sign,productquality,public image ISO 9000 registration and enhanced
and supplierrelations(Ebrahimpour businessperformance throughper-
etal.y1997).A separatestudyshowed ceived productquality.Recall that
thatISO companiesperceivedtheir one ofthemajorcriticisms of ISO is
twotop externalbenefitsto be im- thatitdoes notensureproductqual-
provedqualityand competitive ad- ityor performance (Papps,1995;Rei-
vantageand theirtwo top internal mann and Hertz,1996). However,
benefits to be improveddocumenta- clauses4.9 and 4.9 (a) of ISO 9001
tion and qualityawareness(Peach, (ANSI/ASQCQ9001-1994)state:
1997). 4.9 Process Control: The supplier shall
Conceptually, argumentsfor the identifyand plan the production,installa-
benefits of ISO 9000 registration are tion, and servicingprocesseswhich directly
linked to the previously discussed affectqualityand shall ensure that these
betweenquality processes are carried out under controlled
generalrelationship conditions.Controlled conditions shall in-
andbusinessperformance. Clause7.2 clude the following:
of ANSI/ISO/ASQC 9000-1-1994 a) documented procedures defining the
states*'Increasedglobalcompetition manner of production, installation,and
hasled toincreasingly morestringent servicing, wherethe absence of such procedures
could adversely affect quality, (emphasis
customer expectations withregardto added) (1994:5).
quality.To be competitive andsustain
good economicperformance, organ- Whileitis accurateto observethat
izations/suppliers need toemployin- clauses4.9 and 4.9(a) do not guar-
creasingly effective and efficientsys- anteeproductquality,it is unfairto
tems" (1994: 8). Accordingly, the suggestthatthestandardis indiffer-
mostcommonclaimsare thatISO ent on the subject.The growingac-
9000 registration leads to improved ceptanceof the positionthatimple-
operatingperformance throughre- mentation of theISO 9000 standard
ductionofscrapandcorrective action shouldbe consideredthefoundation
processes, enhanced profitability, ofa morecomprehensive qualitypro-
and marketing advantagesresulting gram(Ho, 1995;Merrill, 1995;Peach,
fromtheinternational recognition of 1997;Wenmothand Dobbin,1994)
theISO logo (Ho, 1995;Jacksonand or managementsystem(Uzumeri,
Ashton,1995;Papps,1995;Wenmoth 1997) solidifiesthe conceptuallink

334 and White
Simmons
betweentheISO 9000 qualitysystem PUSTATPC PLUS database,thusen-
and businessperformance. Basedon suring that all the data were
the claimsof enhancedoperational comparable.The COMPUSTATda-
performance, internationalmarket- tabaseis consideredto be a veryuse-
ingadvantages,and increasedprofit- fulsourceof archivalfinancialdata
abilitypresentedearlier,the follow- forstudying businessand corporate
inghypotheses wereformulated: strategies as wellas forconducting in-
HI: ISO 9000 companiesexperiencehigher dustryanalysis(Davisand Duhaime,
levels of operational performancethan 1992). We selected1995as theyear
non-ISO 9000 companiesin theirindustry. offocusin thisstudybecausethema-
H2: ISO 9000 companiesexperiencehigher
levels of foreignsales than non-ISO com- jorityofcompaniesin theCOMPUS-
TATdatabasereported financial
data
panies in theirindustry.
H3: ISO 9000 companies are more profita- throughthatyear.
ble than non-ISO 9000 companies in their Venkatramanand Ramanujam
industry. (1986) advocated that researchers
adopt a broad conceptualization of
EMPIRICAL ANALYSIS businessperformance thatincludes
bothoperationaland financialindi-
Methods,Measures, Sample
cators.Financialindicators wouldbe
used to indicatethe profitability of
ISO 9000
The source used to verify thebusiness.Someofthemorecom-
registrationwas the ISO 9000 Regis- monindicators are re-
ofprofitability
- NorthAmerica:
teredCompanyDirectory turnon assets(ROA) and returnon
August 1996 (Irwin, 1996). This investment (ROI). Operational meas-
sourceprovideda listingof all ISO ures such as market-share, product
9000 registeredcompaniesin the quality,and efficiency couldimprove
U.S. and Canada, organizedby two the understanding of businessper-
digitSIC code. For each registered formancebecause theseare factors
site,it providedinformation on the thatmightlead to profitability.
standardto whichthe companywas One of COMPUSTAT'sstandard
registered (e.g.,9001,9002),effective reportsprovideda five-year summary
date,registrar,certificate
number, ac- ofa company's keyfinancial and per-
creditation scheme,scopeofregistra- formanceratios.Venkatraman and
tion(productsand services), and the Ramanujam(1986) supportedthe
address, phoneandfaxofthesite.To use of COMPUSTATas a secondary
controlforpotentialdifferences be- data sourceforbothfinancialmeas-
tweenindustries, thesampleforthis uresand operationalmeasures.The
studywas drawnfroma singletwo- ratioreturnon assets(ROA) wasse-
digitSIC code.The selectedSIC code lected to representthe dependent
was36- electronic and otherelectri- variableprofitand the ratiosales/
cal equipmentand components, ex- stockholder equityto representthe
cept computerequipment - because dependent variable performance
thereare moreISO 9000 registered (operational).Returnon assetsis a
companiesin thisSIC code thanany generally acceptedmeasureoffirm fi-
other(Peach,1997). nancial performance(Russo and
The listofpotential companiesand Fouts,1997). Althoughrelativemar-
all associatedfinancialdatawereac- ket positionor marketsharewould
quiredfromStandard& Poor'sCOM- havebeenpreferable measuresofop-
JOURNAL OF MANAGERIALISSUES Vol. XI Number3 Fall 1999

erationalperformance, thistypeof isteredCompanyDirectory- NorthAmer-
secondary data is notreadily available ica:August 1996(Irwin,1996)didnot
for all businesses (Chakravarthy, providethe specificfour-digit SIC
1986) and is not reportedin COM- code forthe manufacturing sitesit
PUSTAT. The ratio sales/stock- listedas registered underSIC 3600;
holderequitywasconsideredaccept- however, it did providea description
ableas a measureofoveralloperating of the site's certifiedproductsand
efficiency. COMPUSTAT also pro- services.
videdforeign salesforeach company Associating the companylistedin
as a percentage oftotalsales.To sat- COMPUSTAT with the registered
isfyunivariatenormality assumptions, manufacturing sitewasnota problem
thisvariablewastransformed fordata becauseforthe majority of the ISO
analysisbytakingitssquareroot. companieswe identified, only one
Two covariates, firmsize and time sitewas registered and the descrip-
of registration for ISO firms,were tionofproducts matchedtheprimary
consideredfortheirpotentialsignif- four-digit SIC code identifiedby
icantcorrelation withthedependent COMPUSTAT. However, several
variables.Findingsof a recentmeta- companiesdid have multipleregis-
analysisshowedthatalthoughfirm teredsites (forexample,Texas In-
sizeis oftenincludedas a controlvar- struments had 19 registeredsites).
iablein studiesoffinancialperform- Thisbecamean issuewhendetermin-
ance, "bigness"perse does ensure ing how long a companyhad been
profitability(Capon etal, 1990).We registered. In thesecases,wefocused
usedthenaturallogarithm oftotalas- on the earliestregistered sitewhere
setstorepresent thevariablesize.The the product description corre-
transformation of thisvariablewas spondedmostcloselyto theprimary
necessary to satisfytheassumption of four-digit SIC code of the company.
univariatenormality. Powell (1995) We used thisregistration date when
foundthattimesinceadoptioncan calculating how long the company
affect therelationship betweenqual- had been registered to ISO 9000.
itymanagement effortsand perform- A moreimportant issueassociated
ance.IfISO registration doeshavean withthe data,especiallyforthe few
impact on business performance, the companieswithmultipleregistered
impactof registration mayincrease sites,is examining theefficacy ofISO
withtime.The variabletimewasde- 9000 registration withfirmlevel fi-
finedas thedifference in monthsbe- nancialperformance variables.While
tweenthedatefinancial datawerere- acknowledging that it is the specific
ported in 1995 and the date the manufacturing sitethat is certified
company wasregistered to ISO 9000. and notthetotalorganization, weac-
We queriedthedatabasefora list cepted the argument that the deci-
ofall U.S. companieswhoseprimary sionto pursueISO 9000 registration
SIC codewasbetween3600and 3699. is a strategic one made at theorgan-
The COMPUSTATlistingprovided izationalleveland musttherefore be
thespecific four-digitSIC code (e.g., evaluatedin relationto measuresof
3661,3672,3674) for599 companies overallcorporateperformance and
in thisrange.Next,we checkedthis profitability (Papps,1995). For com-
listingagainstour sourceofISO reg- panieswithmultiplemanufacturing
isteredcompanies.The ISO 9000Reg- sites,decisionsregarding thepriority

336 and White
Simmons
ofregistrationareprobably moretac- nalsample,including statisticson for-
ticalthanstrategic. eign sales as a percentage total
of
Of the 599 companieslistedby salesforeach groupand SIC code.
COMPUSTAT,we wereable to iden- If the threedependentvariables
tify148 (24.7%) as beingregistered are significantly correlated, a multi-
to ISO 9000. To further controlfor variateapproachtodataanalysis isap-
variation within we lim-
thisindustry, The
propriate. sample size required
itedthepotentialISO sampleto the todetecta mediumeffect sizeata sta-
110firms withtheprimary SICs 366X powerof .80 in a multivariate
tistical
and 367X, the two mostprevalent framework withtwogroupsand three
SICs in thesample.We further elim- dependentvariables is approximately
inatedcompaniesthateitherdid not 100 (Hairetal, 1995). Becauseweex-
report1995financial dataor had not pected ISO registration to have a
been registered to ISO 9000 forat smallto mediumeffecton the de-
least12 months, measuredfromthe pendentvariables, theresulting sam-
monththeyreportedtheir1995fin- ple sizeof 126 was considered accept-
anciais.This resultedin an initial able. The assumptionsconcerning
sample of 64 ISO companiesfor powerandeffect sizewillremainvalid
study.Preliminary analysisof thede- evenifthedata supporta univariate
pendent variablesrevealedthatval- approachto data analysis. This sam-
ues forROA thatexceeded+/-35.00 ple size can be used only if thecom-
resulted inviolationofthecriticalas- paniesin SIC 366Xand 367Xdo not
sumptionsof univariatenormality differsignificantly as a groupalong
and homogeneity of variance.One the dependentvariables,thereby al-
ISO company(SIC 3661) was elimi- lowing them to be considered a com-
natedfromthe sampleforthisrea- binedsample.
son.Of the63 ISO companiesin the
finalsample,35 were registered to RESULTS
ISO 9001and 28 to ISO 9002.
A comparablegroupof63 compa- To determine if the twodifferent
niesin SICs 366Xand 367Xthatwas groups of SIC codes (366X and
not registered to ISO 9000 in 1995 367X) could be combinedto form
wasselectedto completethesample. one sample,separateone-way ANO-
In a finalattempt to controlforvari- VAsforthedependentvariablesper-
ationwithintheindustry, we triedto formance,profit,and foreignsales
balancethesamplesbyfour-digit SIC wereperformed. Theirwereno sig-
(Chakravarthy, 1986). The 15 ISO nificantdifferencesbetween the
companiesin SIC 3672 couldnotbe groupsforanyofthedependentvar-
matchedbecausetherewereonly13 iables:profit(F= 1.50,P< .22); per-
non-ISOcompaniesreporting finan- formance (F= .20,P< .66); and for-
cial data in 1995 thatmetthe ROA eign sales (F = .13, P < .72). As a
criteria.Severalnon-ISOcompanies result,theSIC codeswerecombined
in SIC 3672reportedextremely neg- toformone sample(N = 126)forfur-
ativevaluesforROA in 1995.Thus, theranalysis.
the compositionof the non-ISO The variabletimewasassessedfor
groupincludesone extracompany in its impacton the threedependent
eachoftheSIC codes3674and 3661. variablesforthosecompaniesregis-
Table 1 containsa summary ofthefi- teredto ISO 9000 (N = 63). Timeof

TABLE 1
SIC Codes Includedin theSample3
SIC I Description I ForeignSalesb:ISO ForeignSalesb:Non-

Code Companies ISO Companies
3661 Telephoneand TelegraphApparatus 13.73 3.5
(N=U) (N=12)
3663 Radio and TelevisionBroadcastingand 22.25 11.75
Communication Equipment (N = 8) (N = 8)
3669 Communication Equipment,NEC 19.00 0.00
(N=l) (N=l)
3672 PrintedCircuitBoards 2.53 18.62
(N=15) (N=13)
3674 and RelatedDevices
Semiconductors 22.35 15.38
(N = 20) (N = 21)
3678 ElectronicConnectors 35.00 2.25
(N = 4) (N = 4)
3679 NEC
ElectronicComponents, 9.00 29.50
I I (N=4) I (N=4)
a TotalN = 126. N forSIC 366X =
41; N forSIC 367X = 85
bThis numberis the
averageforeignsales as a percentageoftotalsales. For ISO companies,the
combinedaveragewas 13.14% (Std. Dev. = 23.75; N = 63). For non-ISOcompanies,thecombined
= =
averagewas 16.02% (Std. Dev. 20.46; N 63).
registration forISO firmsin our sam- covariatesize are reportedin Table 2.

ple ranged from 12 months to 55 Althoughthis appears to be a prob-
months,witha mean of 25.4 months. lem suitable for analysiswitha mul-
Ifthelengthof timeregisteredto ISO tivariatetechnique, the data do not
9000 had a significantimpact on ei- confirmthisassumption.Because the
ther performance,profit,or foreign threedependentvariablesare not sig-
sales,itwould need to be included as nificantlycorrelated, separate AN-
a covariatein the subsequent analy- COVAS willbe performedon each of
ses. Separate linear regressionsre- the dependent variables instead of
vealed thatthe effectof timewas non- performinga singleMANCOVA. The
= variablesize willbe included as a cov-
significantfor performance (F
=
.0001, P < .99), profit(F .90, P < ariate because its relationship to
.35); and foreignsales (F= 3.67, P< profitand foreignsales is significant.
timewasnotincluded
.06) ; therefore, Examination of both normal proba-
as a covariatein the subsequentanal- bilityplots and statisticsforskewness
ysis. revealed that all of the variablesap-
The descriptivestatisticsfor the proximatedthe normal distribution.
three dependent variables and the Levene's testof equalityof errorvar-

338 Simmonsand White
TABLE 2
DescriptiveStatisticsand Correlations
Variable (N = 126) I Mean I SD I 1 I 2 I 3

Performance 2J5 ^62
Profit 5.65 10.25 ^09
ForeignSales8 2.35 3.02 -JA -M
Sizeb 1 4.71 1 1.80 | .02 | .30* [ .38**
ISO Companies
Variable IN I Mean I SD I Min I Max
Performance 63 2.15 2.74 -7.39 14.93
Profit 63 9.91 8.23 -20.09 30.42
ForeignSales8 63 2.69 2.98 0.00 8.43
Sizeb 63 5.50 1.81 0 97 10.03
Non-ISO Companies
Variable N Mean SD Min Max
Performance 63 2.15 2.52 -8.84 10.59
Profit 63 1.40 10.37 -29.81 15.22
ForeignSales8 63 2.01 3.04 0.00 9.90
Sizeb I 63 1 3.92 | 1.42 [0 94 | 6.85
*
p< .001
**p<.0001
a
Square rootof foreignsales as a percentageoftotalsales.
bNatural oftotalassets($ millions).
logarithm
iancesrevealedthateach dependent did not experiencehigheropera-

variablesatisfiedthe assumptionof tionalperformance and foreignsales
homoscedasticty. thannon-ISOcompanies.One final
Examination ofthedependentvar- test was conductedfor descriptive
iablesrevealsa significantdifference purposesonly. This ANOVA con-
forprofit(F = 15.11,P< .0001)and firmed in size
difference
a significant
nonsignificant differences for per- betweenthetwogroups(F = 29.60,p
formance (F= .007,P< .93) andfor- < .0001),withtheaveragesizeofISO
eignsales(F= .51,P< .47) between companiesin thesamplebeinglarger
ISO and non-ISOcompanies. The de- thantheaveragesizeofnon-ISOcom-
statistics
scriptive forthe twogroups panies.
of companies(Table 2) show that
ISO registeredcompanies had a DISCUSSION
higher average profitability than
companiesin theirindustry thatwere Does registration really matter?
notregistered toISO 9000;therefore, This studyprovidesa muchneeded
hypothesis3 issupported. Contraryto systematic, analy-
multi-organization
hypotheses 1 and 2, ISO companies betweenISO
sis of the relationship

9000registration and multiple, objec- isteredand moredata becomeavail-
tivemeasuresof businessperform- able, longitudinalanalysiswiththe
ance thatattempts to addressthisis- inclusionofinstrumental variablesto
sue. Contrary to thosethatpromote identify directional causalityin recip-
the benefitsof ISO 9000, thisstudy rocal relationships wouldbe benefi-
did notsupporttheclaimsthatISO cial (Bentlerand Chou, 1987). Re-
companiesrealizeadvantagesin op- search of this type would also
erationalperformance and foreign promotean understanding of the
sales over non-ISO companies.In mechanisms thatinfluencethe rela-
supportof ISO 9000,we foundthat tionshipbetweenISO and business
theaverageISO 9000registered com- performance thatthisstudydid not
pany in the electronics industry is address.
largerand moreprofitable thanthe It is also likelythata similarrecip-
averagenon-ISOcompany, although rocalrelationship mayexistbetween
firmsize did not affectprofitability. foreign sales and ISO Al-
registration.
Formanagers in thishightechnology we
though argued that higher foreign
area,theability toproduceaffordable sales wouldbe an indicatorof ISO
qualityis especiallyimportantbe- registration, theforeignsalesactivity
causewithin weeksofa productintro- offirmsmayalso be a cause of deci-
ductionbyone company,a product sionstopursueregistration. One rea-
can become an industrywide com- son forthe nonsignificant relation-
modity(Feigenbaum, 1994).An ISO shipwe foundbetweenforeignsales
9000quality system mayindeedbe an and ISO 9000registration maybe the
important factor in the affordable we
way opera tionalizedthisvariable.
qualityequation because of its rela- Becausemanagersare persuadedto
tionshipto firmprofitability. Con- believethe international marketing
traryto Uzumeri's(1997) assertion, benefits ofISO 9000 registration are
thisstudydoes offerevidencethat this
pervasive, study looked at total
ISO 9000mayultimately be good for foreignsales.In reality, the interna-
organizations. tionalmarketing benefitsofISO 9000
Thereare,however, severallimita- probably includesignificant regional
tionsto thisstudy.It is important to effects. Forexample,in certainareas
realizethatthisstudydoes notestab- of the world,industrial sectorsmay
lishthatISO 9000registration leadsto demand,customersmayexpect,or
firmprofitability. The cross-sectional government regulations mayrequire
natureof thisstudywasonlyable to thata supplierhaveeithera quality
showthatin theelectronics industry management system thatcompliesor
in 1995, ISO 9000 registered firms is registered to an appropriateISO
weremoreprofitable than non-ISO 9000 standard.A studycomparing
firms. It is perhapsequallylikelythat onlytheEuropeansalesofregistered
the relationship betweenISO 9000 and nonregistered firmsmay find
and
registration profitability is some- thatnonregistered firmsdo indeed
whatreciprocal.Because of the po- experiencefewersalesin thisregion.
tentially highcertification costs,firms Thisstudycould also be extended
that have slack resourcesmay be byobtainingadditionalmeasuresof
morelikelyto add ISO 9000 to their effectiveness and by determining if
repertoirethanfirmswithoutslackre- theimpactofISO 9000is thesamein
sources.As morefirmsbecomereg- otherindustries as itwasin theelec-

tronicsindustry.For example, Uzer- measures of performance. Future

meri (1997) raised the concern that studies that provide more rigorous
a metastandardlike ISO 9000 may theorydevelopmentand testingthan
slow management innovation. Be- ours would be extremelybeneficial.
cause of the investmentrequired to For practitioners,our findings
obtaincertification,thestandardmay should be interpretedwith caution.
be veryhard to repeal once adopted. Althoughwe founda relationshipbe-
Faced withthe possibility ofjeopard- tweenISO 9000 registration and prof-
izing their certification,ISO 9000 and did not finda relation-
itability,
companies may begin to discourage ship betweenregistrationand either
risktakingand experimentation.Us- performanceor foreignsales,we can-
ing total R&D expendituresper em- not conclude that these effectswere
ployee as a proxyforinnovation,this caused byregistration.There maybe
comparisonwould make a relatively other systematicdifferencesbetween
uncomplicated yet valuable contri- registeredand nonregisteredfirms
bution to our understandingof the that significantlyimpact these rela-
potentialliabilitiesof ISO 9000 reg- tionships.For example, ifcompanies
istration. thatare more involvedin qualitypro-
While the dependent variables gramsin generalare morelikelyto be
used in thisstudywere relevantand ISO 9000 registered,then any ob-
convenient,examinationoffirmlevel served relationshipsmay be due to
performancevariablesdoes not cap- the general emphasis on quality
ture the impact the ISO 9000 regis- rather than ISO registration.While
trationprocess has on performance this studydoes not support several
forindividuals,groups,and manufac- proposed benefitsof registration,we
turingfacilities.Our understanding recommendagainst concluding that
of the benefitsof ISO 9000 registra- ISO 9000 registrationdoes not im-
tionwouldbe enhanced byan empir- pact businessperformanceuntillon-
ical analysisof performancevariables gitudinalstudieswithmore perform-
thatare more fine grained than the ance variablesand largersample sizes
ones presentedin thisstudy.For ex- are conducted.Untilthen,practition-
ample, it would be interestingand ers would be advised to ensure that
beneficialto knowhow ISO registra- the business case for ISO 9000 is
tion affectssuch things as product firmlyestablishedwithintheir com-
quality,customerand supplier rela- panies beforeseekingregistration.
tions,and employeesatisfaction. In addition to ISO 9000, other
This studywas verypragmatic.We qualitystandardsare emergingthat
accepted the popular argumentsfor mayhave a substantialimpacton U.S.
the benefitsof ISO 9000 registration industries.Two of the more promi-
and sought to empiricallyexplore nent new standardsare ISO 14000,
thoseclaims.Not surprisingly, our re- the EnvironmentalManagementSys-
sultssuggestthattherelationshipsbe- temsStandards,and QS9000, Quality
tweenISO 9000 registration and busi- Systems requirements created by
ness performanceare complex and Ford, Chrysler,and General Motors
our understandingof these relation- for their suppliers (Peach, 1997;
ships is underdeveloped.We did not Uzumeri, 1997; Zuckerman, 1997).
attemptto explain in any detail why ISO 14000 is designed to harmonize
ISO 9000 registrationshould affect environmentalmanagementsystems

withISO 9000's qualitymanagement practiceas powerfulstakeholdersare

system,while QS9000 incorporates aggressivelypromotingtheir imme-
ISO 9001 and imposes additional diate use (Uzumeri,1997). There will
requirements that address specific continue to be an abundance of im-
U.S. auto industryconcerns. These portantresearchquestions to be an-
standardsmay have a profound im- swered with regard to these stan-
pact on management theory and dards.
References
ANSI/ASQC Q9000-1-1994."Quality managementand qualityassurance stan-

dards - Guidelinesforselectionand use." Milwaukee,WI: AmericanSociety
forQualityControl.
ANSI/ASQC Q9001-1994. "Qualitysystems- Model forqualityassurancein de-
sign,development,production,installation,and servicing."Milwaukee,WI:
AmericanSocietyforQualityControl.
Arnold,Kenneth L. 1994. The manager'sguidetoISO 9000. New York,NY: The
Free Press.
Bender, PeterM. and C. Chou. 1987. "Practicalissues in structuralmodeling."
SociologicalMethodsand Research16: 78-117.
Brown,Alan, RobertMillen and AmrikS. Sohal. 1995. "Future researchissues
in totalqualitymanagement."Asia PacificJournalofQualityManagement 4 (2):
88-92.
Capon, Noel,JohnU. Farleyand ScottHoenig. 1990. "Determinantsoffinancial
performance:A meta-analysis."Management Science36 (October): 1143-1159.
Chakravarthy, Balaji S. 1986. "Measuringstrategicperformance."Strategic Man-
agement Journal7 (September/October):437-458.
Chowdhury, Jhinukand AjayMenon. 1995. "Multidimensionalcomponentsof
quality and strategicbusinessunitperformance:A PIMS test."JournalofMan-
Issues
agerial 7 (Winter):449-465.
Davis,Rachel and Irene H. Duhaime. 1992. Diversification, verticalintegration,
and industryanalysis:New perspectivesand measurement."Strategic Manage-
mentJournal13 (October): 511-524.
Deming, W. Edwards. 1986. Out of thecrisis.Cambridge,MA: MIT Center for
Advanced EngineeringStudy.
Ebrahimpour,M., B.E. Withersand N. Hikmet. 1997. "Experiences of US- and
foreign-owned firms:A new perspectiveon ISO 9000 implementation."Inter-
nationaljournalofProduction 35 (2): 569-576.
Research
Feigenbaum, Armand V. 1994. "How total qualitycountersthree forcesof in-
ternationalcompetitiveness."NationalProductivity Review13 (Summer): 327-
330.
Ferguson,Wade. 1996. "Impact of the ISO 9000 series standardon industrial
marketing."IndustrialMarketing Management 25: 305-310.
Fine, Charles H. 1986. "Quality improvementand learningin productivesys-
tems." Management Science32 (October): 1301-1315.

Goodman, D. 1998. "Thinkingexport?Think ISO 9000." WorldTrade11 (Au-

gust): 48-49.
Hackman,J. Richard and Ruth Wageman. 1995. 'Total qualitymanagement:
Empirical,conceptual,and practicalissues." Administrative ScienceQuarterly40
(June): 309-342.
Hair,JosephF.,Jr.,Rolph E. Anderson,Ronald L. Tatham,and WilliamC. Black.
1995. Multivariatedata analysis.Fourthedition.Englewood Cliffs, NJ:Prentice
Hall.
Hendncks,KevinB. and Vinod R. Singhal. lWY. "Does Implementingan fcttec-
tiveTQM ProgramActuallyImproveOperatingPerformance?EmpiricalEvi-
dence fromFirmsThat Have Won QualityAwards." Management Science43
(September): 1258-1274.
Ho, Samuel K.M. 1995. "Is the ISO 9000 senes fortotalqualitymanagement?
InternationalJournalofPhysical & Logistics
Distribution 25 (1): 51-66.
Ishikawa,Kaoru. 1985. Whatis totalqualitycontrol? TheJapaneseWay.Englewood
Cliffs,NT:Prentice-Hall.
ISO 9000 registeredcompany directory:North America. 1996. August. Burr
Ridge, IL: IrwinProfessionalPublishing.
Jackson,Peter and David Ashton.1995. Managinga qualitysystem usingBò/hl'/
ISO 9000 (formerlyBS 5750). London: Kogan Page.
Jacobson,Robertand David A. Aaker. iy87. lhe strategicrole ot productqual-
ity."Journal ofMarketing 51 (October): 31-44.
Juran,J.M. 1974. Thequalitycontrol handbook.Third edition. New York,NY: Mc-
Graw-Hill.
1995. A historyof managing forquality:The evolution, trends,and future
directionsofmanagingforquality. Milwaukee,WI: ASQC QualityPress.
Lederer,PhillipJ and Seung-KyuRhee. 1995. "Economics of totalqualityman-
agement."JournalofOperations Management ' 2 (June): 353-367.
Merrill,Peter. 1995. "ISO yoOO:On the road to totalquality, lma Magazineoy
(May): 21- 24.
Papps, Ivy.1995. "Evaluationofperformance,monitoringcostsand qualityman-
agement." International JournalofQualityand Reliability,12 (3): 49-56.
Peach, R.W. 1997. The ISO 9000 handbookp. Third edition. Chicago, IL: Irwin
ProfessionalPublishing.
*
Powell,Thomas C. 1995. Total qualitymanagementas competitiveadvantage:
A reviewand empiricalstudy."Strategic Management Journal16 (January):15-
37.
Reed, Richard,David Lemak and Joseph C. Montgomery.1996. "Beyond pro-
cess: TQM contentand firmperformance."Academy ofManagement Review1
(January): 173-202.
Reimann,CurtW. and HarryS. Hertz.1996. "The Baldnge Awardand ibO 9000
registrationcompared." Journal forQualityand Participation 19 (January/Feb-
ruary):12-19.
Russo, Michael .V. and Paul A. Fouts. 1997. A resource-basedperspectiveon
corporateenvironmentalperformanceand profitability." Academyof Man-
aeement Tournai40 (Tune): 534- 559.
Struebing,Laura. 1996. "SurveyfindsISO registration is marketdriven." Quality
29
Progress (March): 23.

Terziovski,Mile,DannySamsonand DouglasDow. 1995."The impactof ISO

9000certification on customersatisfaction."
AsiaPacific
Journal Man-
ofQuality
agement4 (2): 66-68.
Uzumeri,MustafaV. 1997."ISO 9000 and othermetastandards: Principlesfor
management practice?"TheAcademy ofManagementExecutive
11 (February):
21-36.
Venkatraman, N. and VasudevanRamanujam.1986."Measurement ofbusiness
performance in strategyresearch:A comparisonof approaches."Strategic
Management Journal 11 (October):801-814.
WallStreet
Journal. 1992. "BusinessBulletin:Not manyU.S. firms. September
17,A: 1.
1996."BusinessBulletin:International Standards."November14,A:
1.
Wenmoth, BryanA. and DavidJ.Dobbin.1994."Experiencewithimplementing
ISO 9000." Asia PacificJournalofQualityManagement 3 (3): 9-27.
Zuckerman,Amy.1997. International Yourpassporttoworld
standardsdeskreference:
New York,NY: AMACOM.
markets.


The Relationship Between ISO 9000 and Business Performance

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Relationship Between ISO 9000 and Business Performance

Uploaded by

Copyright:

Available Formats

The Relationship Between ISO 9000 and Business Performance: Does Registration Really

This content downloaded from 143.88.66.66 on Fri, 2 Aug 2013 11:52:42 AM