Copyright eContent Management Pty Ltd. Innovation: Management, policy & practice (2014) 16(3): 392403.

A longitudinal study of innovation competence and quality

management on rm performance
CHUN-HSIEN WANG
Department of Bio-Business Management, College of Management, National Chiayi University,
Chiayi, Taiwan

Abstract: This study explores the relationship between innovation competences and quality management initiatives
and considers how quality management initiatives influence both innovation competence and firm performance. A longitudinal survey of 607 high-technology firms indicates innovation competence is an important driver of firm performance,
a key element of quality management initiatives. The effectiveness of innovation competence is contingent on quality
management initiatives. Building on the existing literature, this study employs the resource-based view of firms and
applies institutional theory as a theoretical framework for empirical analysis. The results show that an inverted U-shaped
relationship exists between innovation competence and quality management in high-technology industries. We argue that
theextent to which research and development (R&D) activity is associated with performance improvements depends on the
extent to which a firm exceeds the minimum requirements for ISO 9000 quality certification. These findings help explain
some inconsistent results in prior studies on innovation and quality management.
Keywords: innovation competences, ISO-certified quality, high-tech firms, resource-based view, institutional
theory

nnovation and quality management practices

are key means to sustaining competitive advantage. Both can be seen as valuable resources for
building capabilities, promoting product and
process practices, and enhancing performance
gains. Innovation (Cho & Pucik, 2005; Naveh
& Erez, 2005; Schumpeter, 1934) and quality
management practices (Corbett, Montes-Sancho,
& Kirsch, 2005; Naveh & Marcus, 2005) have
been shown to benefit firms in which they operate. Such empirical studies demonstrate the range
of motives leading firms to undertake innovation
and deploy well-managed quality practices.
Despite previous research on the relationships
between innovativeness and performance of the
firms (Atuahene-Gima, 1996; Kleinschmidt &
Cooper, 1991; Naveh & Erez, 2005; Roberts,
1999; Subramanian & Nilakanta, 1996), and
between well-managed quality programmes
and various firms outcomes (Corbett et al.,
2005; Corredor & Goi, 2011; Lam, Lee, Ooi,
& Lin, 2011; Talib, Rahman, & Akhtar, 2013;
Terziovski, Power, & Sohal, 2003), little is known
about asymmetric impacts exerted on firms
performance gains by the coexistence of innovation competence and well-managed quality
practices. Several contributions (Lpez-Mielgo,

392

Montes-Pen, & Vzquez-Ords, 2009; Ooi, Lin,

Teh, & Chong, 2012; Perdomo-Ortiz, GonzlezBenito, & Galende, 2006) have yielded valuable
insights into the relationships between innovation
competence and quality management practices.
In particular, firms higher innovation capabilities
may have a positive effect on quality management
practices and in turn contribute to improved firm
performance (Escanciano, Fernndez, & Vzquez,
2002; Lpez-Mielgo etal., 2009).
However, the relationships between innovation, quality management programmes, and
the firms performance were not fully identified in that research. Those relationships warrant
further investigation and fuller interpretation.
Identification of conditions under which particular relationships enhance or constrain innovation
competencies and performance is an important
research area. To address the above gaps in knowledge, this study integrated the resources-based
view of the firm (RBV) (Barney, 1991, 2001) and
institutional theory (DiMaggio & Powell, 1983)
into a theoretical framework for exploring how
innovation competence, quality management, and
the interaction of these factors determine firm performance. This study had two primary objectives.
The first was to examine the potentially non-linear

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Innovation competence and quality management on firm performance

relationship between innovation competences and

quality management practices implementation in
high-tech sectors. The second objective was to elucidate how quality management practices might
strengthen or weaken the relationship between
innovation competence and firm performance.
The paper is organised as follows: The next
section offers an overview of the relevant literature and development of hypotheses; third section presents the Methodology; fourth section
analyses the Results; and fifth section presents the
Discussion and conclusions.
LITERATURE REVIEW AND HYPOTHESES
Innovation is a firms most valuable asset for
achieving competitive advantage (Cho & Pucik,
2005). Theoretically, this perspective rests on the
resource-based views of the firm (Barney, 1991,
2001). Innovation is one of the most important
activities of firms, as it not only provides access
to markets but also enables firms to maintain
performance gains. Consistent with this perspective, research in innovation studies has identified
positive performance effects when firms engage
in innovative endeavours, including firms product innovation (Bigliardi, 2013; Kleinschmidt
& Cooper, 1991), process innovation (Bigliardi,
2013; Wan, Ong, & Lee, 2005), technological innovation (Schumpeter, 1942; Utterback &
Suarez, 1993; Wang, Lu, & Chen, 2008), research
and development (R&D) (Prajogo & Sohal, 2006;
Zeng, Peng, & Tam, 2013), and well-managed
quality practices (Naveh & Erez, 2005; PerdomoOrtiz et al., 2006). Well-managed quality practices can enhance firms innovation capabilities
when firms are at an advanced technological level
in their production activities and therefore find it
less costly to adapt to quality standards requirements (Escanciano et al., 2002; Lpez-Mielgo
et al., 2009), especially total quality management (TQM) programmes (Perdomo-Ortiz etal.,
2006) and the adoption of ISO-certified quality
practices (Pekovic & Galia, 2009) to support
firms innovative competences.
Other studies provide supplementary evidence
relating to firms well-managed quality enhanced
innovative competences. For example, Lee, Ooi,
Tan, and Chong (2010) and Ooi et al. (2012)

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describe the well-managed TQM practices that

prevail when a firm have seems to be havegreater
capability for innovation of products, technical
endeavours, and production processes, which,
in turn, contribute to performance gains.
Accordingly, researchers argue that a firm that has
implemented a well-managed TQM programme
with continuously improving operations can sustain and enhance superior performance (Ooi,
Arumugam, Teh, & Chong, 2008; Ooi, Lin, Tan,
& Chong, 2011; Sit, Ooi, Lin, & Chong, 2009;
Talib & Rahman, 2010; Talib et al., 2013). In
addition, previous empirical evidences argued that
ISO-certified quality programmes help firms to
improve their production processes, to implement
organisational change, and to be active in innovation (Casadeus & Gimenez, 2000; Escanciano
etal., 2002; Lpez-Mielgo etal., 2009).
Many researchers propose that well-managed
quality programmes can influence the success of
innovative endeavours (Kumar & Antony, 2008;
Ooi et al., 2012; Prajogo & Sohal, 2003), but
only recently have researchers begun to highlight
the inverse effect. Innovation competence has
various effects on the implementation of wellmanaged quality programmes (Escanciano etal.,
2002; Lpez-Mielgo etal., 2009; Perdomo-Ortiz
etal., 2006). These studies suggest that the effect
of innovative competence on quality management initiatives is not linear.
Overall, the relationship between innovative
competences and quality management initiatives
is more complex than previously thought, especially for high-technology firms, where findings
are the most inconsistent and few relevant studies exist. This current study explores the relationship between innovation competences and quality
management initiatives with respect to how quality management initiatives moderate the relationships between innovative competence and firm
performance.
Innovation competence and quality
management initiatives
Innovation competence is defined in various ways,
from different perspectives, throughout the existing literature. Schumpeter (1934) defined innovation as including the introduction of new products,

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Chun-Hsien Wang

new methods of production, the opening of new

markets and the identification of new suppliers.
According to the OECD broad definition of innovation, there are numerous types of innovation,
including product development and the deployment of new processes, technologies, and management practices (OECD, 1996). Consistent
with the literature on innovation (Rogers, 1995;
Utterback & Suarez, 1993), we define innovation as being associated with new or significantly
improved products or production processes resulting from R&D efforts. On the other hand, quality
is also a complex and multidimensional management activity (Prajogo & Sohal, 2004), and the
quality standards associated with ISO certification
are well-defined and specific to each product or
process to ensure consistency (Corbett etal., 2005).
Previous researchers have explored the paradox
implicit between the negative and positive influences of quality management initiatives on innovation competences. For instance, Prajogo and
Sohal (2001, 2003) have highlighted the significant positive impact that TQM has on innovation
performance. An empirical study by Abrunhosa
and S (2008) found that the implementation of
TQM principles is positively associated with technological innovation. Similarly, Santos-Vijande
and lvarez-Gonzlez (2007) found that TQM
strongly influences a firms overall culture of innovation and its innovation at higher administrative
levels, encouraging a greater degree of novelty, but
only mediates technical innovation. Moreover,
Prajogo and Sohal (2006) show that TQM exhibits strong predictive power with regard to quality
performance, but found no evidence of a significant relationship to innovation performance.
These empirical studies showed that TQM has a
significant positive impact on both product quality and innovation performance. However, some
research has proposed that a negative relationship exists between quality improvement and
innovation activities. For example, AtuaheneGima (1996) found that market orientation has
a negative relationship to product newness in the
manufacturing sector, but not at any level of statistical significance. Wind and Mahajan (1997)
argued that a customer centred philosophy could
lead organisations to focus only on incremental

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improvements in their current products and

service activities, rather than on trying to create novel solutions. This behaviour leads to the
development of uncompetitive products and
follower strategies, rather than to the development of innovative practices. On the other hand,
quality certifications such as ISO 9000 required
high standardisation and low variability (Garvin,
1988), and this may be inconsistent with the goals
of innovative initiatives. For instance, innovation
in high-technology firms requires relatively novel,
prospective knowledge (Levinthal & March,
1993) and the exploration of new opportunities
and paradigms (Naveh & Erez, 2005). According
to the philosophy of quality management, continuous improvement requires precision with regard
to processes, procedures, and outcomes. By contrast, innovativeness reflects a firms tendency to
engage in and support new ideas, knowledge and
technology. Maintaining existing relationships
and dynamics does not foster innovation, and
evaluations of innovation and quality improvement should consider the impact of the existing
relationships on firm performance.
As mentioned above, previous research reveals
a number of inconsistencies in the relationship between innovation competence and quality improvement (Abrunhosa & S, 2008; Cho
& Pucik, 2005; Prajogo & Sohal, 2001, 2003).
Lpez-Mielgo et al. (2009) argue that managers
often emphasise the substantial conflicts between
innovation and quality management. Positive and
negative relationships may exist between innovation competence and quality improvement.
Although there is no consistent evidence of a
direct relationship between the two, the available evidence suggests that innovation and highquality products or services operate in tandem
as key drivers of competitive advantage (Cho &
Pucik, 2005). Accordingly, we contend that the
relationship between innovativeness and quality
improvement is unlikely to be as simple as that
in the proposed linear model: Innovation competences may promote a greater level of quality
but may also decrease with increasing product
or technological maturity (Istvan, 1992). When
technology accumulates, matures, and becomes
obsolete, it can be quickly and easily replaced

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by more advanced technology from competitors

(Granstrand, 2000). Evidence of competitive
responses to technological substitution exists in
high-tech industry. Gimeno, Hoskisson, Beal,
and Wan (2005) found that, in highly competitive market, technological substitution is a greater
threat to rival firms than the loss of a competitive
position in a noncompetitive market. Based on
such evidence, it seems that technological substitution is rapidly altering the nature of competition in high-technology industries and, as a result,
innovative competences are challenged by substitution of new technologies for old ones. These
authors preface the existence of a nonmonotonic
relationship between these entities. On the basis
of their work, for the purposes of this study, we
propose that an inverted U-shape relationship
exists between innovation competences and management initiatives.
Hypothesis 1. There will be an inverted, curvilinear
U-shaped relationship between R&D expenses and
quality management certification.

Innovation competence and firm performance

High-technology firms engage in innovation as
a way to acquire knowledge, to increase competitiveness and to create new skills that intensify
competition within the high-technology business environment. Roberts (1999) suggests that
a firm that repeatedly introduces innovations will
exhibit sustained profitability. R&D expenditures
are therefore increasingly viewed as an important
investment in innovation. As noted by Simpson,
Siguaw, and Enz (2006), R&D expenditures are
a proxy for a firms innovation activity, primarily
because R&D activities accelerate the development of capability for innovation and foster innovative activity. Tang (2006) describes how R&D
and technology acquisition can significantly
improve products or introduce new or significantly improved methods and processes of production. Prajogo and Sohal (2006) also propose
that R&D efforts compliment TQM, enhancing
firms innovation performance. Similarly, LpezMielgo etal. (2009) provide a detailed account of
how firms that actively engage in R&D and innovation activities are able to obtain greater benefits
from TQM.

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In response to increasing competitive and

dynamic business environment, many hightechnology firms have invested heavily in R&D
and innovation efforts to develop novel and innovative products that meet market demand. More
specifically, firms are heavily dependent on their
R&D and innovation capabilities (Duysters &
Hagedoorn, 2000; Wan et al., 2005), and this
innovativeness can help firms to capture and
maintain their market share, thereby improving
profitability. Blonigen and Taylor (2000) argued
that R&D activity and innovation are central
components of the economic analysis of hightechnology industries. Zahra and Covin (1994)
and Canals (2000) asserted that R&D investments often directly contribute to a firms innovation capabilities and that such capabilities are a
vital resource for firms operating in technologybased industries. Griffith, Redding, and Van
Reenen (2004) provided econometric evidence
that R&D expenditures play a role in research
discoveries and outcomes and that it is the main
means by which firms catch up with competitors in of innovation and technology. In addition, Subramanian and Nilakanta (1996) show
that innovativeness had a positive and significant
effect on organisational performance. These previous studies provide empirical evidence of the
positive relationship between innovation and firm
performance. Thus, we hypothesise the following:
Hypothesis 2. A firms innovative competences are
positively associated with firm performance.

The moderating role of quality management

systems on firm performance
Previous studies have argued that well-managed
quality certification is likely to influence firm
innovativeness (Corbett et al., 2005; Naveh &
Erez, 2005; Terziovski et al., 2003). Adopting
quality certification standards can help to
improve operational efficiency and thus improve
performance (Naveh & Marcus, 2005; Prajogo
& Sohal, 2003). This is because well-managed
quality complements R&D activities improving
the operational and innovation activities of hightechnology firms. ISO 9000 is a standardised
quality certification system that facilitates product design, manufacturing, delivery, service and

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support (Corbett etal., 2005; Naveh & Marcus,

2005). Previous research correlates quality
improvement and certification not only with firm
performance (Corbett etal., 2005; Naveh & Erez,
2005) but also with how firms conduct business
and integrate their innovation activities into their
work (Naveh & Marcus, 2005). ISO-certification
improves a firms competitive position (Powell,
1995) and helps firms to improve their internal
quality or productivity, as well as to maintain or
even increase their market share (Corbett et al.,
2005). Firms that obtain well-respected certifications can improve their reputation (Lpez-Mielgo
etal., 2009), thus meeting the needs of the market while also achieving higher productivity and
customer satisfaction (Terziovski etal., 2003).
Driven by competition or by the need for
competitiveness, firms, especially those in highly
competitive high-technology industries, have
increasingly turned to external coercive forces
to obtain certifications or objective evaluations.
Along these lines, Terziovski etal. (2003) pointed
out that customer pressure was the principal motivation for firms pursuing ISO 9000 certification.
This is consistent with the institutional theory
that firms operate within a social context and that
public opinion and social pressures may shape the
actions of firms. According to institutional theory,
firm pressures emerge from societal expectations
and cause firms to adopt similar economic behaviours and activities (DiMaggio & Powell, 1983).
The tendency of firms to conform to social influences in their internal and external operational
environments leads these firms to adopt similar
strategic approaches. As ISO-certification becomes
widely accepted as national quality assurance standards, a trend emerges for firms to require their
suppliers and partners to follow ISO 9000 certification procedures and standards. This trend may
constitute a coercive isomorphism (Guler, Guillen,
& Macpherson, 2002). As a result, firms that consider themselves adequate for ISO-certification
seek it to enhance their capability of process-based
improvement practices. Accordingly, our study
moves beyond the previous research on this subject, drawing on institutional theory to cultivate
a better understanding of how the adoption of
product and process management norms through

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the ISO 9000 certification programme produces

competitive advantage.
Participating in the ISO-certification system
may increase costs by necessitating internal procedures and other actions that ensure conformity
with extant regulations (Zhu & Sarkis, 2004).
High-technology firms may also need to undertake further R&D, expensive maintenance and
revisions to improve their processes and products.
To achieve the goals of a quality certification management system, high-technology firms may be
required to undertake R&D activities. Moreover,
the quality management system adopted by an
organisation may create extensive sunk costs such
as capital expenditures and expenses related to
training, research and maintenance outlays. Such
expenses may be (at least partially) irreversible.
Through such investments, a firm may foster
quality-based R&D, which can greatly improve
operations to support innovation deployment.
Based on these considerations, the interaction
between quality certification, innovation competence and firm performance is important, primarily because quality improvement initiatives can
promote innovation and improve the performance
of firms. Indeed, Zhu and Sarkis (2004) provide
evidence that quality management moderates the
relationship between eco-friendly supply chain
management practices and organisational performance. Specifically, we hypothesise that quality
certification moderates the relationship between
innovation competence and firm performance.
Hypothesis 3. Quality-certified management practices
positively moderate the relationship between innovation competence and firm performance.

METHODOLOGY
Data sources and measurement
High-technology firms provide an appropriate
setting for our study for three reasons. Firstly, for
high-technology firms to be successful in a rapidly changing and highly competitive environment, innovation competence is necessary for a
competitive advantage and long-term survival
(Chesbrough, 2003; Prajogo & Sohal, 2003;
THT Research, 2005). Secondly, high-tech firms
routinely embark on innovation activities in competitive markets because innovation activities are

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necessary to acquire advanced scientific knowledge and technology in their commercialised

activities. Thirdly, the high-technology sectors in
Taiwan occupy a crucial position in a global hightechnology supply chain, which is necessary for
the development of well-managed quality practices in supporting their product/service development and commercialisation (Hung, Lien, Yang,
Wu, & Kuo, 2011; Kaynak & Hartley, 2005;
THT Research, 2005).
To test the hypotheses, we combined the Taiwan
Stock Exchange Corporation (TSEC), Securities
and Futures Institute (SFI), Taiwan Economic
Journal (TEJ), and China Credit Information
Service (CCIS) databases to construct firm-year
panel data for high-technology firms. These databases are widely used to track firm-level information and performance. Throughout firm-level
analysis, we employed panel logistic regression
and the generalised estimating equation (GEE) to
test the three hypotheses. Our estimates are, therefore, derived from firm-level, across-time variation,
which mitigates the risk that unobserved differences
across firms in the sample are driving the results.
Because our sample was compiled from several
data sources, we had to manually match files to
the firm-year dataset based on their overlapping
dates. In doing so, we made use of the full listing
of all innovation and quality management practices events with which the high-technology firms
had been involved. After merging all of the datasets and deleting observations with missing values for key variables, the final panel dataset used
for analysis included 607 high-technology firms
(from an initial sample of 986 high-technology
firms) from between 2005 and 2010. The survey
sample included high-technology firms involved
in electronics, computers, integrated circuits,
semiconductors, telecommunications and precision equipment. Since each high-technology firm
might have multiple plants or facilities certified,
this study focussed on the first ISO 9000 certification (Corbett etal., 2005). Thus, to extract ISO
9000 certified firms (with at least one certified
plan), this study compiled the ISO-certified firms
from the online TEJ and CCIS to collect the ISO
9000 quality certification data. In addition, all of
the patent data of the high-technology firms were

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collected from the Taiwan Intellectual Property

Office of the Ministry of Economic Affairs.
Measurement variables
Firm performance
According to research purpose, we chose to use
return on assets (ROA) as on objective measure of
such performance.
Quality management
The possession of ISO 9000 certification was used
to determine whether or not firms had implemented quality management initiatives. To measure this variable, we created a binary variable for
ISO 9000 certification. The variable was coded as 1
if a firm had ISO 9000 certification in a given year.
A value of 0 indicated no ISO 9000 certification.
Innovation competences
Innovative competences were measured using four
variables. R&D expense was determined to be the
most important resource for fostering innovation
because it was found to contribute the most to
a firms innovation capacity in technology-based
industries (Dosi, 1988; Wang & Huang, 2007;
Zahra & Covin, 1994; Zeng etal., 2013).
Product innovation
This variable indicates whether a high-technology
firm introduced new or significantly improved
products. Product innovation was measured
using a dummy variable. If a firm introduced
a product innovation from 2005 to 2010, that
firm was assigned a value of 1, and if not, it
received a value of 0.
Process innovation
Process innovation indicates that a high-tech
firm introduced new tools, approaches, or techniques that significantly improved its production
processes during the period from 2005 to 2010.
Process innovation is a dummy variable and indicates whether or not a high-technology firm has
conducted process innovative activities.
Control variables
The first control variable is firm age, which is
used to capture fixed firm-level effects. As in prior

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related research, this variable is used to determine

the age of various firms. The second control variable is firm size and is measured based on the total
number of employees at a firm. Given that the
resource-based view and institutional theory both
take firm size into account, we treat firm size as a
control variable. The third control variable is total
firm assets, which we included in the logarithm of
the total assets because firms with abundant capital
may have more resources available for use in facilitating innovation and improving performance.

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more accurate standard errors than the fixed-effect

and random-effect models (Hardin & Hilbe,
2003). We therefore conducted maximum likelihood estimation using the GEE approach to estimate the parameters of all of the hypotheses.
RESULTS
To further test for multicollinearity, we used variance inflation factors (VIFs) as a diagnostic technique for collinearity. VIFs with a value below 10
indicate a low level of multicollinearity (Belsey,
Kuh, & Welcsh, 1980). In this study, all VIF values
for predicting variables in Model 4 were below 10.
Thus, multicollinearity was not considered a problem in our model. Table 1 displays the descriptive
statistics and correlations for the dependent and
main explanatory variables. In general, our results
show a significant correlation between the dependent and independent variables, as well as acceptable correlations among the independent variables.
Table 2 presents the results of the hierarchical regression analysis that was conducted using
the panel logistic and GEE regressions to estimate innovation competence, quality management, and firm performance. The baseline models
(Models 1 and 3) contain the control variables.
Model 1 used the panel data for the high-tech
firms and employed panel logistic regression to
display all of the control variables for the ISO
9000 quality management system. In Model 3,
GEE regression was used to estimate all of the
control variables related to high-tech firm performance. The results obtained using Model 2,
which include all controls for firm performance

Statistical methods
Two regression models were used to test the
hypotheses of this study. In this study, ISO 9000
quality certification is a binary variable, which led
us to use panel logistic regression models. Implicit
in this approach is the assumption that a firm
implements quality management initiatives to
meet ISO 9000 certification. In the panel logistic
regression model, we analyse quality management
activities as affected by the series of explanatory
variables for innovation competence discussed
above. The GEE approach was used for the data
analysis. The GEE approach was developed by
Liang and Zeger (1986) and Zeger and Liang
(1986) for use in analysing longitudinal, panel,
and series correlation in a pooled sample. In this
study, we account for changes in a firms innovation competence and quality certification management across time. This implies that observation
samples were not independent from year to year,
thus violating the assumption of independence
across observations necessary in traditional least
squares regression. The use of
the GEE approach allows us TABLE 1: DESCRIPTIVE STATISTICS AND CORRELATIONS FOR ALL OF THE VARIABLES
to overcome this restriction,
1
2
3
4
5
6
7
acting as a robust variance estimator to produce efficient and 1. R.O.A
1.000
unbiased regression estimates 2. Firm age 0.065** 1.000
for longitudinal analysis and 3. Firm size
0.229** 0.185** 1.000
analysis of nonindependence 4. Firm assets 0.084** 0.073** 0.604** 1.000
0.126** 0.040* 0.403** 0.360** 1.000
(Liang & Zeger, 1986). We 5. R&D
expense
used the GEE because it allows
for the modelling of correlated 6. Product inn. 0.095** 0.170** 0.093** 0.072** 0.155** 1.000
observations in longitudinal 7. Process inn. 0.125** 0.052** 0.163** 0.103** 0.150** 0.666** 1.000
studies. It allows for more effi- 8. ISO 9000 0.040* 0.072** 0.153** 0.056** 0.116** 0.075** 0.133**
cient parameter estimation and *p<0.05; **p<0.01, N=3642.

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Hypothesis 2 tests the primary

eff
ect
of innovation competence
Dependent
Logistic
Logistic
GEE
GEE
GEE
on firm performance. As Model
variable
ISO 9000 ISO 9000
ROA
ROA
ROA
4 in Table 2 shows, the process
Model 1
Model 2 Model 3 Model 4 Model 5
innovation (=2.703, p<0.05)
Intercept
0.835
2.572
1.220
2.132
4.515**
has a significant impact on firm
(1.105)
(4.572)
(4.788)
(4.914)
(1.777)
performance, and this result
Age
0.038***
0.034** 0.171*** 0.182*** 0.181***
partially supports Hypothesis
(0.012)
(0.011)
(0.040)
(0.042)
(0.423)
2. This finding was unexpected
Size
0.425***
0.463*** 0.595*** 0.652*** 0.654***
and does not fully explain the
(0.083)
(0.097)
(0.158)
(0.714)
(0.174)
performance of high-technology
Assets
0.126
0.500
0.734
0.730
0.037
firms. One possible interpreta(0.118)
(0.355)
(0.401)
(0.402)
(0.011)
tion of these data is that the
0.748***
0.390
0.549*
R&D expense
(0.155)
(0.249)
(0.262)
benefits of innovation activi0.001
R&D expense2
0.046***
0.000
ties may depend more on a
(0.020)
(0.010)
(0.020)
high-technology firms ability
Product inn.
0.087
1.743
0.450
to engage in their performance
(1.272)
(1.991)
(0.461)
than on R&D expenditure.
Process inn.
2.104***
2.703*
1.920
The former ability, in turn, may
(0.376)
(1.074)
(1.718)
depend on the firms own R&D
ISO 9000
0.810
0.881
staff and advanced external tech(0.809)
(2.163)
nological acquisitions. Model 5
0.296*
R&DISO 9000
assesses the moderating role of
(0.147)
quality management practices.
Product inn.
2.719
ISO 9000
(2.539)
As Model 5 in Table 2 shows,
the ISO 9000 quality manage1.316
Process inn.
(2.164)
ISO 9000
ment (=0.296, p<0.05) has
Observations
3642
3642
3642
3642
3642
a significant impact on firm perLog-likelihood
380.735 372.558
formance. Thus, Hypothesis 3 is
62.37***
80.87*** 31.51*** 65.53*** 70.47***
partially supported. In addition,
Wald 2
when we examined the interStandardised error coefficients are in parentheses. p<0.1; *p<0.05;
action between R&D activity
**p<0.01; ***p<0.001.
and ISO 9000 as proposed in
and innovation competence, suggest a curvilinear Hypothesis 3, we found that it was partially starelationship between R&D expenses and quality tistically significant, indicating that quality certifimanagement. As shown in Model 2 in Table 2, the cation management is a well-defined mechanism
figure for R&D expenses is positive (=0.748, that enhances the influence of R&D activity on
p<0.001), the figure for R&D expenses squared the performance of high-tech firms. This result is
is negative ( = 0.46, p < 0.001), and both a very important finding regarding innovation and
effects are statistically significant, which supports quality management, as it suggests that ISO 9000
Hypothesis 1. Initially, rising R&D capability quality management has a moderating effect on
increases the quality of high-tech firms, but there firm performance.
is a threshold value for this variable after which
this relationship becomes negative. These results DISCUSSION AND CONCLUSION
clearly show that increasing R&D expenses ini- This study extends the applicability of the RBV and
tially improves quality management in a high- institutional theory to high-technology firms by
tech firm but then reduces quality management investigating the influence of innovation compeperformance after reaching a threshold value.
tence and quality certification management on the
TABLE 2: PANEL ANALYSIS RESULTS (N=3642)

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performances. This analysis reveals the relationships

between innovation efforts and quality management
and offers a more comprehensive understanding of
how innovation and quality initiatives influence
firm performance. Our study uniquely develops
the findings of previous innovation management
research in that it helps to clarify the role of quality
management and innovation efforts in determining the performance of high-technology firms. As
predicted, the empirical results of this paper provide partial support for our moderated model. Our
data indicate that high-technology firms are able
to improve their performance through innovation
efforts and quality management. These results lend
support to our proposal that innovation efforts
and quality management affect the performance of
firms in the high-technology sector.
In accordance with our predictions, this
study revealed an inverted U-shaped relationship
between R&D expenses and ISO 9000 quality
management. At a relatively low level of R&D
expenses, an increase in such expenses has a positive
impact on ISO 9000 quality management activity.
However, when R&D expenses become relatively
high, increases in R&D expenses may diminish
quality management in high-tech firms. This nonlinear relationship suggests that innovation efforts
can affect ISO quality certification management.
The moderating effect of quality management
is an important finding in the sense that hightech firms can use ISO 9000 certification to foster innovation. Moreover, this finding suggests
that external quality management practices can
enhance internal innovation efforts. In this way,
our study confirms previous findings that indicate
the influence of quality management programmes
on innovation efforts and firm performance. The
previous literature on this subject does not fully
explore the implications of these results and how
innovation efforts and quality management can
enhance overall performance. Our findings confirm that the ISO 9000 quality management system can enhance internal innovation and improve
firm performance. Given the complementary relationship between innovation efforts and quality
management, engaging in innovation efforts and
quality management practices simultaneously can
improve firm performance.

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Contribution and implications

This study makes four contributions. Firstly, by
combining the RBV and institutional theory, we
have provided a more nuanced theoretical framework for analysing the relationship between
innovation efforts and quality management. Our
empirical analysis suggests that external pressures
increase the need for quality management certification for the processes, products, and technologies
of high-tech firms. A significant number of hightechnology firms engage in ISO-certified quality
management in the face of increased competition.
Secondly, this study appears to be the first attempt
to examine how the ISO 9000 quality management system moderates innovation efforts and
firm performance, including the provisions discussed in this study and those recommended by the
RBV and institutional theory. By considering how
the ISO 9000 quality certification moderates the
effect of innovation on the performance, this study
makes an original contribution to the literature on
innovation management. Thirdly, our study shows
that R&D expenditures have an inverted U-shaped
relationship with ISO quality management activities in the high-tech industry. These findings can
deepen our understandings of the non-linear relationship between firm-specific R&D activity and
quality management activities, as this non-linear
relationship is shown to invert after a certain
threshold, thus creating a curvilinear relationship.
Finally, this study provides insight into a previously
unexplored area of research and contributes to our
understanding of how quality management activity
influences firm-level innovation. We contribute to
this line of research by empirically demonstrating
how and under what conditions various types of
innovation activities are linked with quality management and firm performance in the context of
the high-technology sector.
Three important managerial implications have
emerged from this study. Firstly, senior managers and decision makers should carefully consider
how the use of an ISO-certified quality management system enhances their performance. This
finding suggests that a well-managed quality
practice is instrumental towards enhancement of
performance outcomes that stem from innovation endeavours. Secondly, the study builds upon

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Innovation competence and quality management on firm performance

previous research (Lpez-Mielgo et al., 2009;

Naveh & Erez, 2005) to move beyond those perspectives and understand the relationships between
the explored factors. Understanding the relationships between innovation endeavours and quality
management is necessary if the aim is to integrate
internal innovation endeavours and external quality certification management. By identifying the
moderating impact of ISO-certified quality management on innovation endeavours, this study
provides guidance on whether or not, and how,
to implement well-managed quality practices.
Thirdly, our findings suggest that the extent to
which high-technology firms can benefit from
their innovation endeavours depends upon the
strength of the ISO-certified management regime
in its operational context. Thus, high-technology
firms need to proactively strengthen their ISOcertified management regime to maximise the
profitability of their internal innovation activities.
This study contains some limitations that offer
avenues for further research. First, this study ignores
other industries that may be relevant to the successful conversion of innovation endeavours into
firm performance. Further research might apply
our theoretical framework to other industries to
compare the roles of ISO-certified quality management in those industries with our findings.
This cross-sectional data might make it possible to
infer generalised relationships between innovation
endeavours and quality management. Secondly, the
importance of innovation competences may also be
moderated by a variety of other factors. Therefore,
additional research should expand the present
model by considering other quality-based mechanisms and institutions (e.g., environment certified
management standards). Thirdly, this study relied
on a well-developed dataset readily available for
empirical analysis without first-hand information
from senior managers of high-technology firms on
their opinions about innovation strategy. Further
research may consider empirically combining survey and archival methods to explore how differences
in innovative strategies among firms influence their
ability to achieve superior performance.
In conclusion, this study examined the effect
of innovation competences and quality management practices on the performance of firms in

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high-technology industries. Our empirical results

offer insight into the relationship between innovation and quality management and their effect on
firm performance, advancing our understanding of
innovation efforts and quality management. Our
results indicate that the relationship between innovation endeavours and quality in the high-technology
industry is ambiguous and requires further study.
ACKNOWLEDGEMENTS
The author would like to thank the National
Science Council of the Republic of China,
Taiwan for financially supporting this research
under Contract No. NSC 99-2410-H-415-001.
The authors would also like to acknowledge the
contribution of the anonymous referees and the
Editors, Dr Jason Potts and Dr Mei-Chih Hu,
their valuable comments and suggestions have
contributed significantly to this paper.
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Received 10 April 2012

Accepted 19 February 2014

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