The effect of company size on the relationship between TQM strategy and organisational performance

Abstract The purpose of this study was to test the effects of company size on the strength of the relationship between TQM and organisational performance. Based on a cross‐sectional study of manufacturing firms in Australia and New Zealand, the paper tests two hypotheses involving TQM and organisational performance. The central finding of the study is that TQM has a significant and positive relationship with most of the dimensions of organisational performance. The relationship weakened for defect rates and warranty costs when it was co‐varied for company size. We conclude that company size impedes the implementation of TQM. Larger companies tend to gain greater benefits from TQM than smaller firms. These findings are consistent with some of the literature. Overall, the findings show that a typical manufacturing organisation is more likely to achieve high organisational performance with TQM than without TQM. The findings have implications for managers wishing to formulate a business strategy based on TQM.