The relationship between TQM and performance in small manufacturing enterprises: The mediation effect of failure

This paper investigates the relationship between TQM elements, failures and firm performance. The paper presents an alternative methodology to assess not only the direct impact of TQM on firm performance, but the indirect impact of TQM on performance via internal and external failures. The results of the study revealed that there is a significant relationship between the TQM practices and internal and external failure and firm performance. Customer focus and participation are important predictors for internal failure. Customer focus and quality system are found to be important predictors for external failure. In addition some of the internal and external failure elements are particularly strong predictors of firm performance. They are reworking from internal failure and warranties from external failure that have significant impact on firm performance. Employee involvement, customer focus and quality system are found to be significant predictors for the direct relationship between TQM practices and firm performance.