Research framework for theimpact of total qualitymanagem.docx

Research framework for the
impact of total quality
management on
competitive advantage
The mediating role of innovation performance
Van Cang Nguyen and Ngoc Tuan Chau
Faculty of Statistics – Informatics, University of Economics
The University of Danang, Vietnam
Abstract
Purpose – The purpose of this paper is to apply a more accurate
competitive advantage construct to study
the impact of total quality management on firms’ competitive
advantage in the context of the weakening of the
competitive advantage of firms that are renowned for the
excellent quality management. It also aims to find a
better explanation for the source of competitive advantage
through mediating constructs.
Design/methodology/approach – The authors use iterative
methodology by reviewing, analyzing,
synthesizing and refining the current state of the literature and
propose a research framework which allows
for overcoming the limitation encountered in previous empirical
research.
Findings – The use of two second-order constructs including the
incremental innovation performance and
radical innovation performance which enable the researchers to
have a better explanation about the mediating
role of innovation performance.

Practical implications – This study is seeking to contribute to
the practice of total quality management
area of research. Specifically, this study applies two second-
order measurement scales of innovation in use,
actualize the use of the new measurement scale of competitive
advantage and explain clearly the role of total
quality management on competitive advantage in the current
context.
Originality/value – This is one of the few papers investigating
the impact of total quality management on
competitive advantage, developing the conceptual model that
examines the mediating role of innovation
performance.
Keywords Competitive advantage, Total quality management,
Radical innovation,
Incremental innovation
Paper type Research paper
1. Introduction
The weakening of many Japanese firms that are well-known
worldwide because of their
excellent quality management, along with the strong rise of
Korean and Chinese firms that
tend to innovate rapidly, is currently shaking the confidence in
the philosophy of total
quality management (TQM). The success of global companies
such as BMW, LG Electronics,
Nintendo, Nokia, Samsung, Tata and Toyota has often been
attributed to their innovative
product offerings and systematized approach to use R&D for
product development (Colvin,
2009). Innovation is an important source of competitive
advantage in the knowledge
economy era (Daghfous, 2004; Prajogo and Ahmed, 2006).

Numerous companies which have
benefited from innovation increased their profits and market
share, but the important point
is that, a firm cannot be successful with innovation if it cannot
produce products that meet
acceptable quality standards (Nowak, 1997).
The current issue and full text archive of this journal is
available on Emerald Insight at:
www.emeraldinsight.com/2059-6014.htm
Impact of total
quality
management
335
Received 26 February 2017
Revised 27 June 2017
Accepted 29 June 2017
Review of International Business
and Strategy
Vol. 27 No. 3, 2017
pp. 335-351
© Emerald Publishing Limited
2059-6014
DOI 10.1108/RIBS-02-2017-0016
http://dx.doi.org/10.1108/RIBS-02-2017-0016

A review of the literature shows that positive effects of TQM on
were supported by many scholars and experimental studies.
However, few definitions in the
literature define competitive advantage in a rather fuzzy manner
(South, 1981), while that
other statements define competitive advantage implicitly
(Sigalas and Economou, 2013).
Moreover, previous studies have not distinguished concepts of
competitive advantage and
performance. As a consequence, the scale of competitive
advantage in these studies has not
accurately reflected competitive advantage.
Moreover, most previous studies have not clearly separated
incremental innovation
performance and radical innovation performance, in which,
performance is said to be the strength of TQM and radical
innovation performance is just a
consequence of TQM. Therefore, such studies have not really
clarified the role of TQM on
innovation performance. Only the study by Kim et al. (2012)
has separated incremental
innovation performance and radical innovation performance.
However, the innovation
performance in this study has been subdivided into five
dimensions. This subdivision can
result in the weaker reflection of innovation performance on
each dimension. As a result, the
conclusion of tests on the impact of TQM on competitive
advantage could diminish its
strength.
On the other hand, many scholars have emphasized that the role

of an innovation bridge
between TQM and competitive advantage is becoming
increasingly important. TQM is a
good way of improving quality while facilitating the innovation
process (Martínez-Costa and
Martínez-Lorente (2008). TQM can be one of the prerequisites
of innovation (Hoang et al.,
2006; Perdomo-Ortiz et al., 2006). A recent study by
Dervitsiotis (2011) pointed that the
innovation process should be carried out under the TQM for the
maximum beneficial impact
on performance. This bridging role of innovation has not been
shown in the previous
experimental studies.
There are three research questions that are needed to answer in
the above context: (1) Has
TQM still maintained an active role of creating competitive
advantage? (2) Has TQM
positively contributed to a type of today’s important
performance – innovation performance?
And (3) How do the various types of innovation performance
play as the mediating role in the
causal relationships between quality management and
competitive advantage?
Globalization and rapid development of technology have made
competition increasingly
fierce in the international business. Porter and Van der Linde
(1995) argue that there is a new
paradigm of international competitiveness, which is dynamic in
nature and based on
innovation. The resulting competitive advantage of companies
that have succeed in business
rests on the capacity for innovation and improvement.
Therefore, this paper helps

companies, especially companies in the field of international
business, effectively apply
TQM to enhance their competitive advantage and achieve
success in their business.
2. Theoretical background and hypotheses
2.1 Theoretical background
According to Kaynak (2003), TQM can be defined as a holistic
management philosophy that
strives for continuous improvement in all functions of an
organization, and it can be achieved
only if the total quality concept is utilized from the acquisition
of resources to customer
services after the sale. The perspective of considering TQM as a
complete body, which
affects the performance of a company, has been used by many
scholars such as Prajogo and
Sohal (2003, 2006), Martínez-Costa and Martínez-Lorente
(2008), Prajogo and Hong (2008),
Sadikoglu and Zehir (2010).
The previous literature on innovation has shown the importance
of having a clear
definition of innovation by distinguishing radical innovation
and incremental innovation
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(Abernathy and Clark, 1985; Cooper, 1998). Some scholars
argue that there is a negative
relationship between TQM and innovation performance, while

most others insist that there
is a positive relationship between them. Furthermore, the
literature review also shows the
different roles of TQM for incremental innovation and radical
innovation. Most scholars
believed that while TQM mainly affects incremental innovation
performance, it has a little or
indirect impact on radical innovation performance.
Crosby (1996), Demming (1986), Feigenbaum (1991), Ishikawa
and Lu (1985) and Juran
(1992) emphasized that customers define quality, and in turn,
the quality itself creates
customer satisfaction that leads to an improvement of
competitive position. Scholars
believed that innovation enables companies to quickly adapt
changes and discover new
products and markets, thereby protect them against the unstable
business environment
(Martínez-Costa and Martínez-Lorente, 2008). Successful
innovation can make external
imitation more difficult and allow firms maintain their
competitive advantage effectively
(Garcia-Morales et al., 2007).
Research concepts on behavioral science in general and on
business in particular are often
latent variables that cannot be measured directly (Ahire et al.,
1996). As a result, latent
variables that were tested from previous experimental studies
should be used to ensure their
validity and reliability (Tata et al., 1999).
2.2 Proposed research model
Based on the review of the literature, a research model is
proposed as shown in Figure 1 that

supports to answer three posed research questions. In this
model, TQM is considered as a
complete body of quality management that affects their
innovation performance and
competitive advantage of firms.
To have clear explanation about the different roles of
performance and radical innovation performance, two second-
order constructs of innovation
performance were used, including incremental innovation
performance and radical
innovation performance. These two second-order constructs
were developed based on the
first-order constructs of innovation performance, derived from
empirical research of Kim
et al. (2012) to ensure their reliability and validity.
H4
H6
H7
H3
H5
H1
H2
Competitive
advantage
TQM

Radical
innovation
performance
Incremental
innovation
performance
Radical product
innovation
performance
Radical process
innovation
performance
Incremental product
innovation
performance
Incremental process
innovation
performance
Leadership
Strategic
planning

Customer focus
Information and
analysis
People
management
Process
management
Employee
suggestion
Problem
solving group
Figure 1.
Proposed research
model
337
Impact of total
quality
management
2.3 Constructs in proposed research model
2.3.1 TQM: second-order construct. In this study, the
measurement model for TQM used by
Samson and Terziovski (1999) is accepted as the core model.
The elements of this construct

constitute the criteria of the Malcolm Baldrige National Quality
Award (MBNQA) that has
been accepted by many scholars such as Curkovic et al. (2000)
and Juran (1995) as matching
with the content of TQM practices. Second, the MBNQA
criteria can be applied to firms both
in the areas of manufacturing and non-manufacturing, and so it
can be used in this study.
Third, this TQM construct has been used in experimental studies
of many scholars such as
Prajogo and Sohal (2003, 2004, 2006) in Australia, Feng et al.
(2006) in Australia and
Singapore, Prajogo and Hong (2008) in Korea, so its reliability
and validity have been tested.
Finally, Vietnam – where this research framework will be
experimented – has the quality
award based on criteria that are similar to the MBNQA criteria.
Observed variables for six
elements (leadership, strategic planning, customer focus,
information and analysis, people
management and process management) are taken from Prajogo
and Sohal (2006). This is the
scale of Samson and Terziovski (1999) that was adjusted and
tested by Prajogo and Sohal in
2003, 2004 and 2006 to ensure reliability.
Schroeder and Flynn (2002) have made comparisons about
quality management practices
among 164 firms at the USA, Japan, Germany, Italy and the UK
in the 1990s and have found
that Japanese manufacturers achieved an outstanding
performance in quality management
in comparison with other countries on a variety of activities
such as process control,
information feedback and small group activities. Therefore, to
reflect its own characteristics

of TQM, Japan, based on the study of Phan et al. (2011) on
Japanese firms, two elements are
added to TQM measurement models of Samson and Terziovski.
They are employee
suggestion element and problem-solving group element.
The employee suggestion element measures how a firm respects,
responds to and uses the
employee suggestions. Creativity and innovation are the
necessary requirements to meet the
needs and to exceed the expectations of customers. In Japan,
“soikufu” is an important
concept that means creative thinking, focusing on employees’
proposals and suggestions or
new ideas. The measurement scale for employee suggestion
element is taken from Phan et al.
(2011). However, in this scale, the authors have used reversed
items for the fifth observed
variable. This can create fake factors that cannot be explained
(Swain et al., 2008; Woods,
2006). On the other hand, if the content of the fifth observed
variable was changed into a
normal variable, its content was repeated in the first observed
variable, so the fifth observed
variable was deleted in this research.
The problem-solving group element is demonstrated by the
establishment of
problem-solving groups, which are actively used to solve
arising problems quickly and
in place. The Japanese model seeks to complement the lean
production system with
coordinated human effort (Fuxman, 1999). The measurement
scale for problem-solving
group element is taken from Phan et al. (2011). However, in this
scale, the authors have

used reversed items for the fourth observed variable. This can
create fake factors that
cannot be explained (Swain et al., 2008; Woods, 2006). As a
result, the fourth observed
variable was adjusted into a normal variable by replacing the
phrase “not use” with the
word “use”.
Therefore, TQM is a second-order construct, including eight
first-order elements as
shown in Figure 1. We operationalized a single composite TQM
construct, followed in
Hendricks and Singhal (1996), Easton and Jarrell (1998),
Douglas and Judge (2001),
Rungtusanatham (2001) and Sadikoglu and Zehir (2010). The
TQM index, which equals
the aggregate of the means of eight TQM elements, can be
formulated as follows:
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338
TQM � �
i�1
8 �
j�1
mi
itemij

mi
(1)
Where itemij is the j
th measurement item of the ith element’s measurement scale,
and mi is the
number of measurement items in the ith element’s measurement
scale.
2.3.2 Incremental innovation performance: second-order
construct. Incremental
innovation mentions minor changes of existing technologies in
terms of design, function,
price, quantity and features to meet the needs of existing
customers (Garcia and Calantone,
2002; Propris, 2002). Incremental innovation focuses on
refining, expanding, improving and
exploiting existing knowledge, skills and technical cycles
(Gatignon et al., 2002). Although
incremental innovation requires a low level of risk, it generates
little benefit (Koberg et al.,
2003). The incremental innovation is the second-order construct
that includes incremental
product innovation performance and incremental process
innovation performance, as shown
in Figure 1.
Incremental process innovation is identified as innovation
associated with the application
of minor or incrementally improved elements into an
organization’s production or service
operations with the purpose of achieving lower costs and/or
higher product quality (Ettlie,
1983; Gatignon et al., 2002; Reichstein and Salter, 2006). Three
observed variables of

incremental process innovation performance are taken from Kim
et al. (2012). This scale was
selected from many empirical studies such as Huergo and
Jaumandreu (2004), Reichstein and
Salter (2006), Jansen et al. (2006), Martínez-Costa and
Martínez-Lorente (2008) and Akgün
et al. (2009); thus, its validity and reliability are ensured.
The incremental product innovation mentions the innovation,
which involves the
introduction of the products (or services) that offer new
features, improvements or the
benefits associated with the technology available on the existing
market (Chandy and Tellis,
1998; Herrmann et al., 2007; Valle and Vázquez-Bustelo, 2009).
Five observed variables of
incremental product innovation performance are taken from Kim
et al. (2012). This scale was
selected from many empirical studies such as Atuahene-Gima
(2005), Subramaniam and
Youndt (2005), Jansen et al. (2006), Herrmann et al. (2007) and
Valle and Vázquez-Bustelo
(2009); thus, its validity and reliability are ensured.
We operationalized a single composite incremental innovation
performance construct
(IIP). The IIP index, which equals the aggregate of the means of
two incremental innovation
elements, can be formulated as follows:
IIP � �
i�1
2 �
j�1

mi
itemij
mi
(2)
and mi is the
scale.
2.3.3 Radical innovation performance: second-order construct.
Radical innovation is
defined as the adoption of new technologies to create a demand
not yet recognized by
customers and markets (Jansen et al., 2006). Radical innovation,
regarded as
competence-destroying (Teece et al., 1997), concentrates on
market pull or technology push
strategies (Li et al., 2008). Radical innovation requires greater
uncertainty and a high level of
risk (Moguilnaia et al., 2005). The radical innovation
performance is the second-order
339
Impact of total
quality
management

construct that includes radical product innovation performance
and radical process
innovation performance, as shown in Figure 1.
Radical process innovation involves the application of the new
or significantly improved
elements for production activities or services of an organization
with the aim for achieving
lower costs and/or higher-quality products (Ettlie, 1983;
Gatignon et al., 2002; Reichstein and
Salter, 2006). Three observed variables of radical process
innovation performance are taken
from Kim et al. (2012). This scale was selected from many
empirical studies such as Huergo
and Jaumandreu (2004), Reichstein and Salter (2006), Martínez-
Costa and Martínez-Lorente
(2008), Valle and Vázquez-Bustelo (2009) and Lau et al.
(2010); thus, its validity and reliability
are ensured.
Radical product innovation is defined as innovation that
involves the introduction of
products or services that are associated with new technologies,
which are different from
existing ones used in existing products or services (Chandy and
Tellis, 1998; Herrmann et al.,
2007; Valle and Vázquez-Bustelo, 2009). Five observed
variables of radical product
innovation performance are taken from Kim et al. (2012). This
scale was selected from many
empirical studies such as Chandy and Tellis (1998), Atuahene-
Gima (2005), Subramaniam
and Youndt (2005), Herrmann et al. (2007) and Valle and
Vázquez-Bustelo (2009); thus, its
validity and reliability are ensured.

We operationalized a single composite radical innovation
performance construct (RIP).
The RIP index, which equals the aggregate of the means of two
elements, can be formulated as follows:
RIP � �
i�1
2 �
j�1
mi
itemij
mi
(3)
and mi is the
scale.
2.3.4 Competitive advantage: first-order construct. In this
research, the definition of
competitive advantage from Newbert (2008) that was modified
by Sigalas et al. (2013, p. 335)
is selected: “Competitive advantage is the above industry
average manifested exploitation of
market opportunities and neutralization of competitive threats”.
This selection is based on
several reasons. First, this competitive advantage definition
meets the criterion that it does

not contain any judgments about its own’s value or company’s
performance (Sigalas and
Economou, 2013). Second, this definition has been formulated
in consultation with senior
executives, who participate in the process of strategic
management at firms, within a tight
process of developing the measurement scale.
Four observed variables of competitive advantage are taken
from Sigalas et al. (2013).
The reason we choose this measurement scale for competitive
advantage is that it was
developed scientifically and rigorously to meet all the
requirements of the construction
process for a new scale. This scale also meets the requirement
of distinguishing competitive
advantages with superior performance that was admitted by the
majority of scholars.
In essence, this is the competitiveness scale of Sigalas et al.
(2013) that was based on a
five-point Likert scale. However, the conversion from the
competitiveness scale to the
competitive advantage scale based on Sigalas et al. (2013) is
really difficult to apply in
practice. The reason is that data from experimental studies are
often not sufficient to
determine the industry average competitiveness. On the other
hand, the competitive
advantage scale of Sigalas et al. (2013) only takes two values (a
firm either has competitive
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340

advantage or not). This scale is essentially ordinal scale, unable
to meet the measuring
demands in scientific research – the interval scale or ratio scale.
Based on the argument that three points on the competitiveness
scale of Sigalas et al.
(2013) are equivalent to the industry average competitiveness,
the competitiveness scale of
Sigalas et al. (2013) can be used as the competitive advantage
scale if the average
competitiveness points of all or most of the surveyed firms are
greater than or equal to three
points. Points that are less than three in this scale can be
considered to measure competitive
disadvantage.
If the experimental sample does not meet this requirement, we
can treat as follows:
eliminate 50 per cent of firms having average competitiveness
points less than three points,
from lowest to highest, and test the hypothesis for the entire
remaining experimental sample
to ensure that the majority of firms in the sample have
competitive advantages (reject the null
hypothesis that average points are equal to or less than three).
2.4 Hypotheses
TQM proponents (i.e. Deming, Juran and Crosby) have not
connected quality management
with radical product innovation. They stressed on the
importance of continuous
improvement of product quality to meet the demands and
expectations from customers.

Some authors like Prajogo and Sohal (2001) and Weirauch
(2006) have reported that the staffs
of TQM firms have worked for gradually improving the existing
system by focusing on the
details of the existing quality process rather than new ideas
changing an existing system.
The customer focus leads the organization to incremental
improvement in current products
and services that can satisfy the current needs of the existing
customers, rather than to
breakthrough (radical) improvement that will satisfy the latent
needs of current and future
customers (Sadikoglu and Zehir, 2010). Nowak (1997) argued
that TQM and quality seem to
be attached to the existing technology because they mainly
focus on the incremental
improvement of the product or existing processes. Hung et al.
(2011) argued that TQM is not
simply a management tool for promoting and improving quality,
but it can also promote a
culture of sharing, trust, openness and innovation when
supported by top management,
employee involvement, continuous improvement and customer
focus. This stimulates
employees to enhance products, processes and organizational
innovation performance.
These lead us to the following hypothesis:
H1. TQM has a positive impact on incremental innovation
performance.
On the other hand, continuous improvement (stressed by TQM)
provides a solid background
on which more radical innovation can be successfully
implemented (Jha et al., 1996). When
pursuing the quality performance, organizations may need to

deal with process innovation,
even in a radical way (Prajogo and Sohal, 2006). This is
because, in certain situations, the
resources needed to meet a new quality standard (e.g.
specification) cannot be achieved
through incremental improvements of existing processes, even
though how many resources
are pumped into this effort. That can only be achieved through
resetting these processes and
innovating radically, more or less (Grossi, 1990). The
experimental research of Hung et al.
(2011) on 223 Taiwanese high-tech companies showed that
TQM had a significant and
positive effect on innovation performance. The innovation in
high-tech companies is often
rather rapid and the content of innovation performance in this
study includes radical
innovation performance. Thus, the following hypothesis is
proposed:
H2. TQM has a positive impact on radical innovation
performance.
TQM practices have significantly affected quality performance,
especially with regard
to customer satisfaction, company’s image, employee quality
awareness and employee
341
Impact of total
quality
management

satisfaction. All TQM efforts will be geared toward the end
result of increasing the
organization’s efficiency and effectiveness, thus increasing
quality performance and
enhancing the organizational competitiveness level (Abu-Doleh,
2012). After examining
the relationship between TQM and firm performance in a sample
of US firms,
experimental results from the study of Powell (1995) indicated
that TQM can create
competitive advantage. Richard et al. (2000) argued that an
effective product design will
reduce costs by eliminating parts that do not add value, and so
make the manufacture of
product easier. The improvement of process effectiveness
coming from experience curve
effects and learning also reduces costs. Therefore, it can be
concluded that TQM has the
potential to create competitive advantage. The studies by Matsui
(2002) and Phan et al.
(2011) on the Japanese manufacturing enterprises showed that
TQM had influence on
competitive advantages in several ways. These theoretical and
empirical bases lead to
the following hypothesis:
H3. TQM has a positive impact on competitive advantage.
To achieve competitive advantage in a changing market, firms
must improve both the
quality and innovation (Feng et al., 2006; Hung, 2007; Irani et
al., 2004). Normally, a specific
innovation offers particular advantages that can support only
strategies that benefit from
those capabilities (Congden and Schroeder, 1996). Process

innovation offers many
competitive advantages. It can reduce costs, improve quality,
shorten delivery times, reduce
inventories, minimize plant and equipment investments, shift
scale economies and allow
greater flexibility (Lauenstein and Skinner, 1980). Tech-
innovation is positively associated
with economic and strategic export performance, suggesting that
comes from technological advances (Silva et al., 2017). The
experimental research of Chen
et al. (2009) on 106 manufacturing firms in Taiwan showed that
innovation performance has
a positive impact on competitive advantage. Experimental
research of Aziz and Samad
(2016) on 220 small and medium sized enterprises producing
food in Malaysia showed that
innovation has a positive impact on competitive advantage.
These theoretical and empirical
bases lead to the following hypotheses:
H4. Incremental innovation performance has a positive impact
on competitive
advantage.
H5. Radical innovation performance has a positive impact on
competitive advantage.
In today’s business environment, the basis of competitive
advantage has shifted from
quality to innovation (Prajogo and Brown, 2004). One of the
core values and concepts
that have emerged in recent versions of MBNQA is related to
innovation management
(Prajogo and Sohal, 2006). Therefore, to achieve competitive
advantage in today’s

business context, firms that are implementing TQM would have
to emphasize
innovation activities, and they would use not only incremental
innovation performance
but also radical innovation performance as a basis to create
competitive advantage for
their firms. In other words, innovation performance is
increasingly important and has
become the mediator between TQM and competitive advantage.
Therefore, the following
hypotheses are proposed:
H6. Incremental innovation performance has the role of
mediator between TQM and
H7. Radical innovation performance has the role of mediator
between TQM and
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3. Methodology
Based on an iterative methodology, the paper reviews, analyzes,
synthesizes and refines the
current state of the literature and proposes a research framework
which allows for
overcoming the limitations encountered in previous empirical
researches and satisfactorily
answering three research questions posed in the context of
attenuate TQM.

To ensure the generalizability, the probability sampling method
should be used to
provide the data for the analysis of the proposed research
model. The partial least squares
path modeling (Hair et al., 2014) method to structural equation
modeling would be
appropriate to test the measurement model and structural model
based on the proposed
research model. The Sobel test (Sobel, 1982) should be used to
test the role of mediator of
innovation performance between TQM and competitive
advantage.
4. Discussion and conclusion
The importance of TQM has been confirmed by many scholars
in previous studies. Although
no longer being appreciated as before, the role of TQM for
innovation and competitive
advantage is still being emphasized. It is unable to maintain a
competitive advantage if the
product quality is not respected. The battery explosion incident
of Galaxy Note 7 and the
recent issue with Samsung washer causing injury to users are
the realistic evidences to
support this view. As a result, to achieve competitive
advantage, firms that are implementing
TQM would have to emphasize innovation activities, and they
would use not only
incremental innovation performance but also radical innovation
performance as a basis to
create competitive advantage for their firms.
The proposed research model allows researchers to test the
impact of TQM as a complete
body, including eight elements of quality management practices

on two types of innovation
performance and on competitive advantage. The proposed
research model also allows
researchers to test the mediating role of two types of innovation
performance. The mediating
role of incremental innovation performance will help to explain
the importance of
incremental innovation performance (stressed by TQM) toward
competitive advantage. The
mediating role of radical innovation performance will help to
explain the impact of TQM or
other agents (e.g. technology management/R&D) on competitive
advantage through radical
innovation performance. The competitive advantage construct
from Sigalas et al. (2013) used
in the proposed research model has met the requirements of
distinguishing competitive
advantages and superior performance. The problem that arises
when converting the
competitiveness scale of Sigalas et al. (2013) to the competitive
advantage scale has been
resolved satisfactorily. Two second-order constructs including
performance and radical innovation performance enable
researchers to have a better
explanation about the mediating role of innovation performance.
Therefore, the proposed
research model will help researchers answer satisfactorily three
mentioned research
questions. The model is a good theoretical framework for
empirical studies.
To survive in the business battlefield, product quality has
become a critical factor in
maintaining a competitive edge, to outperform competitors. This
is especially true if

manufacturers in developing countries would like to participate
in the international market
(Chan et al., 2000). Galperin and Lituchy (1999) also suggested
that, if firms whose cultures
are more congruent with the TQM philosophy implement TQM,
they will be more likely to
improve the quality of their products and services, and therefore
be competitive in the global
marketplace.
Globalization and the rapid development of technology have
made innovation become the
key factor of international business success. Innovation is a
source of competitive advantage
in international markets, which is a crucial antecedent of firm
export performance (Azar and
343
Impact of total
quality
management
Ciabuschi, 2017; Pla-Barber and Alegre, 2007; Singh, 2009).
Innovation is critical for creating
competitive advantage in international markets, which allows
firms to benefit from
economies of scale (Fernández-Mesa and Alegre, 2015), as well
as overcome the size
constraint of domestic markets (Kyläheiko et al., 2011).
Therefore, empirical research results
based on this research framework will be a reliable information
source for firms, especially

firms in the field of international business, applying effectively
TQM to enhance their
competitive advantage in today’s context.
There are limitations to this study that should be noted. First,
this study is just at the
stage of building a framework of research. Hence, it is needed
to have subsequent
experimental studies to test the proposed research model in the
context of today’s global
competition. Second, the proposed research model does not
allow studying TQM under the
perspective of partial TQM (including some of elements) that
can have different impacts on
competitive advantage. This research approach can help firms
have the best way applying
TQM according to its versions to enhance their competitive
advantage. This is the next
research direction in the efforts for improving TQM so that it
can be consistent with the
strategy for today’s international competition.
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Corresponding author
Ngoc Tuan Chau can be contacted at: [email protected]

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mailto:[email protected]
Appendix 1
Table AI.
Scale of measures
Construct Variable descriptions Reference sources
Leadership Senior executives share similar beliefs about the
future direction of this organization
Adapted from Samson and
Terziovski (1999) and
Prajogo and Sohal (2006)Senior managers actively encourage
change and
implement a culture of improvement, learning, and
innovation toward “excellence”
Employees have the opportunity to share in and are
encouraged to help the organization implement
changes
There is a high degree of unity of purpose in our
company, and we have eliminated barriers between
individuals and/or departments
Strategic planning We have a mission statement which has been
communicated throughout the company and is
supported by our employees

Prajogo and Sohal (2006)
We have a comprehensive and structured planning
process which regularly sets and reviews short- and
long-term goals
When we develop our plans, policies and objectives,
we always incorporate the needs of all stakeholders,
including the community
We have a written statement of strategy covering all
business operations which is articulated and agreed
by our senior manager
Customer focus We actively and regularly seek customer inputs
to
identify their needs and expectations
Prajogo and Sohal (2006)Customer needs and expectations are
effectively
disseminated and understood throughout the
workforce
We involve customers in our product design processes
We always maintain a close relationship with our
customers and provide them an easy channel for
communicating with us
We have an effective process for resolving customers’
complaints
We systematically and regularly measure customer
satisfaction
Information and
analysis

Our company has an effective performance
measurement system to track overall organizational
performance
Up-to-date data and information of company’s
performance is always readily available for those who
need it
Senior management regularly has a meeting to review
company’s performance and uses it as a basis for
decision-making
We are engaged in an active competitive
benchmarking program to measure our performance
against the “best practice” in the industry
(continued)
349
Impact of total
quality
management
Table AI.
People management We have an organization-wide training and
development process, including career path planning,

for all our employees
Our company has maintained both “top-down” and
“bottom-up” communication processes
Employee satisfaction is formally and regularly
measured
Employee flexibility, multi-skilling and training are
actively used to support performance improvement
We always maintain a work environment that
contributes to the health, safety and well-being of all
employees
Process management The concept of the “internal customer”
(i.e. the next
process down the line) is well understood in our
company
We design processes in our plant to be “fool-proof”
(preventive-oriented)
We have clear, standardized and documented process
instructions which are well understood by our
employees
We make an extensive use of statistical techniques
(e.g. SPC) to improve the processes and to reduce
variation
We strive to establish long-term relationships with
suppliers
We use a supplier rating system to select our suppliers

and monitor their performance
Employee suggestion Management takes all product and process
improvement suggestions seriously
Adapted from Phan et al.
(2011) and adjusted by the
authorsWe are encouraged to make suggestions for
improving performance at this plant
Management tells us why our suggestions are
implemented or not used
Many useful suggestions are implemented at this
plant
Group problem-solving Our plant forms teams to solve problems
Adapted from Phan et al.
(2011) and adjusted by the
authors
In the last three years, many problems have been
solved through small group sessions
Problem-solving teams have helped improve
manufacturing processes at this plant
We use problem-solving teams much, in this plant
(continued)
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Table AI.

Incremental process
innovation
Our organization introduced minor or incrementally
improved machinery and equipment for producing
products or services
Adapted from Akgün et al.
(2009), Huergo and
Jaumandreu (2004), Jansen
et al. (2006), Kim et al.
(2012), Marínez-Costa and
Marínez-Lorente (2008),
and Reichstein and Salter
(2006)
modified productive processes for producing products
or services
improved information technologies for producing
Incremental product
innovation
Our new products differ slightly from our existing
products
Adapted from Atuahene-
Gima (2005), Herrmann
et al. (2007), Jansen et al.
(2006), Kim et al. (2012),

Subramaniam and Youndt
(2005), and Valle and
Vázquez-Bustelo (2009)
We introduce incremental product innovations into
the market more frequently than our competitors
Our percentage of incremental product innovations in
the product range is significantly higher compared to
the competition
The percentage of total sales from incremental
product innovations is up substantially
We are well known by our customers for incremental
product innovations
Radical process
innovation
Our organization has introduced new or significantly
improved machinery and equipment for producing
Adapted from Huergo and
Jaumandreu (2004),
Reichstein and Salter
(2006), Marínez-Costa and
Marínez-Lorente (2008),
Valle and Vázquez-Bustelo
(2009), and Kim et al.
(2012)
modified productive processes for producing products
or services
improved information technologies for producing

Radical product
innovation
Our new products differ substantially from our
existing products
Adapted from Chandy and
Tellis (1998), Atuahene-
Gima (2005),
Subramaniam and Youndt
(2005), Huergo and
Jaumandreu (2004), Valle
and Vázquez-Bustelo
(2009), and Kim et al.
(2012)
We introduce radical product innovations into the
market more frequently than our competitors
Our percentage of radical product innovations in the
product range is significantly higher compared to the
competition
The percentage of total sales from radical product
innovations is up substantially
We are well known by our customers for radical
product innovations
Competitive advantage Your firm exploited all market
opportunities that have
been presented to your industry
Adapted from Sigalas et al.
(2013)
Your firm fully exploited the market opportunities
that have been presented to your industry

Your firm neutralized all competitive threats from
rival firms in your industry
Your firm fully neutralized the competitive threats
from rival firms in your industry
351
Impact of total
quality
management
Reproduced with permission of copyright
owner. Further reproduction prohibited
without permission.
Research framework for the impact of total quality management
on competitive advantage1. Introduction2. Theoretical
background and hypotheses3. Methodology4. Discussion and
conclusionReferences
Competitive advantage:
the known unknown concept
Christos Sigalas
Department of Business Administration, University of Piraeus,
Athens, Greece
Abstract
Purpose – The purpose of this paper is to investigate
empirically managers’ awareness regarding
the concept of competitive advantage, the most taken-for-

granted concept in the field of strategic
management.
Design/methodology/approach – Managers’ awareness regarding
the concept of competitive
advantage was explored by applying a cross-sectional, self-
administered, e-mail survey.
Findings – The results of quantitative and qualitative data
analyses provide empirical evidence that
senior managers, who are heavily involved in the strategic
management process of their firms, seem to
confuse the concept of competitive advantage with the concept
of sources of competitive advantage,
especially those pertaining to resource-based theory.
Research limitations/implications – The findings establish the
hypothesis that senior managers
are not aware of the concept of competitive advantage. At the
same time, future researchers are
encouraged to continue testing the above hypothesis.
Practical implications – The findings as well as the provision of
a conceptually clear stipulating
definition of competitive advantage from literature could
increase practicing managers’ awareness
relating to the conceptual nature as well as the latent
expressions of competitive advantage.
Originality/value – Since little research, to date, has been
carried out in order to investigate
empirically the awareness of managers regarding competitive
advantage, this study fills an important
gap in the empirical literature of strategic management.
Keywords Competitive advantage, Concept of competitive
advantage,
Definition of competitive advantage, E-mail survey,
Management concept, Managers’ awareness
Paper type Research paper
Introduction

Competitive advantage has been a cornerstone concept in the
field of strategic
management (South, 1981; Baaij et al., 2004) since it explains
what accounts for
differences in performance among firms (Zott and Amit, 2008;
Ceccagnoli, 2009). The
scope of business strategy, on the other hand, is to define the
long-term plan of action a
firm may pursue to achieve its performance goals (Zahra and
Covin, 1993). For that
reason, competitive advantage is widely accepted in strategic
management courses and
textbooks as an essential concept in business strategy (Barney,
1997; Grant, 1998).
However, it has been argued that competitive advantage is a
buzzword that causes
confusion to academics, business executives and consultants
(Markides, 2000). The
source of this confusion is the fact that both academics and
practicing managers have a
tendency to use the term of competitive advantage with
different meaning in different
contexts (O’Shannassy, 2008). The reason behind this tendency
could be that there are
numerous definitions of competitive advantage, each with
sometimes a different
meaning in strategic management literature. Indeed, even
though there is a great
number of statements in the literature of competitive advantage,
a precise and clear
definition has always been quite elusive (Ma, 2000; Arend,
2003; Rumelt, 2003;
O’Shannassy, 2008). Sigalas and Pekka-Economou (2013), who
identify and map
the problems that stem from current conceptualization of
competitive advantage by

the majority of the literature, call this phenomenon as the
“definitional problem of
Management Decision
Vol. 53 No. 9, 2015
pp. 2004-2016
©EmeraldGroup Publishing Limited
0025-1747
DOI 10.1108/MD-05-2015-0185
Received 19 May 2015
Revised 24 July 2015
Accepted 10 August 2015
The current issue and full text archive of this journal is
available on Emerald Insight at:
www.emeraldinsight.com/0025-1747.htm
2004
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53,9
competitive advantage.” Based on the above, it can be assumed
that the managers
will not be able to understand and observe competitive
advantages, let alone develop
one for their own firm. In response to this possibility, this study
employs a field survey
in order to investigate empirically managers’ awareness
regarding the concept of
Literature review

Competitive advantage is a long-lived and conceptually troubled
concept
The concept of competitive advantage has a long history and
tradition in the strategy
literature. Ansoff (1965) is the first scholar who attempts to
define competitive
advantage as the isolated characteristics or particular properties
of individual product
markets which give a firm a strong competitive position.
Nevertheless, the watershed
event that introduced the concept of competitive advantage in
business strategy was
Porter’s (1985) book on competitive advantage. While Porter
(1985) provides no explicit
definition of competitive advantage, he states that competitive
advantage stems from
the firm’s ability to create superior value for its buyers. Porter
(1985) adds that superior
value stems from offering lower prices than competitors for
equivalent benefits or
providing unique benefits that more than offset a higher price.
Based on the above,
Ansoff’s (1965) definition seems to match the sources of
competitive advantage with
the concept of competitive advantage itself. On the other hand,
Porter’s (1985) definition
seems to match value and particularly benefits net of price paid
with the concept of
competitive advantage (Sigalas and Pekka-Economou, 2013).
Since then, many scholars have engaged into the discussion and
research of
competitive advantage. This discussion and research has
generated a large volume of
scholarly output and provided abundant definitions and
statements regarding

competitive advantage. In an attempt to classify all definitions
of competitive
advantage by the most important contributors in the field of
strategic management,
Sigalas and Pekka-Economou (2013) have identified two
streams concerning
competitive advantage’s conceptual demarcation. The first
stream defines
competitive advantage in terms of performance, e.g. high
relative profitability, above
average returns, benefit-cost gap, superior financial
performance, economic profits,
positive differential profits in excess of opportunity costs and
cross-sectional
differential in the spread between product market demand and
marginal cost.
The second stream defines competitive advantage in terms of its
sources or
determinants, e.g. particular properties of individual product
markets, cost leadership,
differentiation, locations, technologies, product features and a
set of idiosyncratic firm
resources and capabilities.
However, both streams seem to render the syllogistic reasoning
of the Sources of
Competitive Advantage-Competitive Advantage-Superior
Performance conceptual
framework in a tautology. The syllogistic reasoning is
consisting of the following major
premise, minor premise and conclusion:
Competitive advantage leads to superior performance [Major
Premise].
Mobility barriers (Caves and Porter, 1977) and/or market

positions (Porter, 1985) and/or
idiosyncratic firm resources and capabilities (Barney, 1991) are
sources of, or lead to, competitive
advantage [Minor Premise].
Mobility barriers and/or market positions and/or idiosyncratic
firm resources and capabilities
lead to competitive advantage which in turn leads to superior
performance [Conclusion].
2005
Competitive
advantage
If the concept of competitive advantage is defined either in the
same way, or in
a manner that it is a subset of superior performance, then the
Conclusion of the
syllogistic reasoning becomes as follows: “Mobility barriers
and/or market positions
and/or idiosyncratic firm resources and capabilities lead to
superior performance which
in turn leads to superior performance.” Clearly the second
causal path in the conceptual
framework is a tautology since it is logically true and the
support with business data is
not required to determine its empirical content.
On the other hand, if the concept of competitive advantage is
defined in terms of its
sources or determinants then the Conclusion of the syllogistic
reasoning becomes as
follows: “Mobility barriers and/or market positions and/or

idiosyncratic firm resources
and capabilities lead to mobility barriers and/or market
positions and/or idiosyncratic
firm resources and capabilities which in turn lead to superior
performance.” It is
obvious that the first causal path in the Sources of Competitive
Advantage-Competitive
Advantage-Superior Performance conceptual framework is also
a tautology.
But then again, what is competitive advantage? Is competitive
advantage any cause
or determinant of superior performance? In other words, does
equate to the so-called sources of competitive advantage, such
as locations,
technologies and product features (see Powell, 2002)? In
addition, is competitive
advantage equal to superior performance, in any form, like
above normal returns
(see Peteraf, 1993), high relative profitability (see Thomas,
1986), above average returns
(see Schoemaker, 1990), economic value surplus (see Peteraf
and Barney, 2003)
and above industry’s average economic profits (see Besanko et
al., 2000)? In addition
to above bewilderment, does competitive advantage mean
winning the game,
i.e. outperforming all rival firms, or merely maintaining a
position in the game, i.e. being
above the industry average (Rumelt, 2003)?
From the above, it should be well acknowledged that not only
are there multiple
meanings of competitive advantage and there is no agreement
on a single conceptually

clear and unambiguous definition among scholars, but also the
prevailing two definitional
streams make the “Sources of Competitive Advantage-
Competitive Advantage-Superior
Performance” conceptual framework tautological. In addition to
the above, in literature
there are also fuzzy and abstract definitions of competitive
advantage. For example, South
(1981, p. 15), defined competitive advantage as the “philosophy
of choosing only those
competitive arenas where victories are clearly achievable.”
Are managers aware of the concept of competitive advantage?
In view of the fact that competitive advantage has always
suffered from a lack of
semantic content (Ma, 2000; Arend, 2003; Foss and Knudsen,
2003; Rumelt, 2003;
O’Shannassy, 2008; Sigalas and Pekka-Economou, 2013), it is
doubtful that the
practicing managers are aware of the concept of competitive
advantage. In particular, it
has not been widely appreciated by academics and scholars that
if they do not conclude
into a conceptually robust definition for competitive advantage,
which does not
incorporate any latent characteristics of the concept of
performance and of the sources
of competitive advantage, then the managers will not be able to
understand, observe
and develop competitive advantage for their firms. Therefore,
one can hardly complain
that practicing managers do not understand the concept of
when academics and scholars themselves, incline toward
semantic imprecision.

Currently it seems that managers are walking in darkness
regarding their
endeavors of finding and developing competitive advantage. In
business strategy-
related university courses and executive seminars, practicing
managers are guided to
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find competitive advantages among their firms’ idiosyncratic
resources and market
positions without being instructed exactly what competitive
advantage is. What
constitutes competitive advantage is a question rarely asked and
even less-frequently
answered. However, without any consistent and precise
stipulative definition for
competitive advantage, the managers do indeed find abstract
competitive advantages
in their firms. This must be what prompted Powell (2001, p.
885) to mention that
“one might suggest that, if asked and similarly prompted,
managers could also perceive
animal shapes in cloud formations or anger in a tree.”Most
practitioners are content to
apply Justice Stewart’s test, i.e. they know competitive
advantage when they see it,
or so they assume (Coyne, 1986).
Defining competitive advantage
Despite the fact that it is extremely difficult to identify a

conceptually robust stipulative
definition for competitive advantage in literature, Sigalas et al.
(2013) have recently crafted
a stipulative definition that it incorporates all the latent
characteristics of the competitive
advantage concept and it completely separates competitive
advantage from its sources
and from the concept of superior performance. In particular,
Sigalas et al. (2013, p. 335)
mention that competitive advantage is “the above industry
average manifested
exploitation of market opportunities and neutralization of
competitive threats.”
Based on Sigalas et al.’s (2013) definition, competitive
advantage is an unobservable
construct and therefore inherently complicated (Godfrey and
Hill, 1995). Due to its
latent nature, competitive advantage is not so easy to identify.
Nevertheless, it must be
clear that competitive advantage is not equivalent to its sources,
e.g. the mobility
barriers, the market positions as well as the idiosyncratic firm
resources and
capabilities. Furthermore, competitive advantage is not
equivalent to superior
performance, which according to Amit and Schoemaker (1993)
is the above average
financial and operational performance. Contrary to the dominant
theoretical
perspectives presented in many academic journals and
textbooks, which define
competitive advantage either in terms of performance or in
terms of its sources or
determining factors, competitive advantage is conceptually
distinct. Therefore,

the sources of competitive advantage, competitive advantage
and superior
performance are three distinct and different concepts.
Methodology
Research design
In order to investigate empirically managers’ awareness
regarding the concept of
competitive advantage, this study employed a quantitative
empirical research as the
research approach. Furthermore, since primary data from the
business environment were
required for the empirical research, field survey was chosen as
the research method. The
field survey purposefully included firms across all economic
sectors in Greece, turning
the field survey into cross-sectional survey. Following Dillman
et al.’s (2009) Tailored
Design Method that encourages the use of modern technology in
surveys in order to
minimize total survey error, the cross-sectional survey was
carried out using e-mail mode.
Lastly, the cross-sectional, e-mail survey was designed to be
administered without the
presence of the researcher, making the survey a self-
administered one.
Sample
The population of the cross-sectional, self-administered, e-mail
survey is comprised of
all medium-sized and large firms incorporated in Greece. The
database of Hellastat was
2007
Competitive

advantage
used to draw the sampling frame, because, pursuant to Loyd’s
Register Quality
Assurance, it contains almost all firms with corporate legal
form as per Greek
commercial law. Applying the size criterion of 10 million Euros
of revenues,
i.e. European Union Commission (2003) recommendation
concerning the size thresholds
of medium-sized and large enterprises, Hellastat database
resulted to a sampling frame
of 2,033 firms.
For the calculation of sample size, Cochran’s (1977) random
sampling techniques were
used. Assuming confidence level of 95 percent, margin of error
of 5 percent and
population’s standard deviation of 0.5, as per Bartlett et al.’s
(2001) recommendations,
the required sample size is equal to 384 cases. However, since
the required sample size of
the 384 cases exceeds the 5 percent of the population, the
required sample size corrected
for population size, using Cochran’s (1977) correction formula,
is equal to 323 cases.
In addition, assuming a response rate between 14 and 19
percent, a minimum drawn
sample size between 1,700 and 2,307 cases should have been
used. The lower and upper
bound of the range is set from the expected response rate in
surveys that target C-suite
officers (see DeTienne and Koberg, 2002; Neck et al., 2004).
Since the estimated minimum

drawn sample size of the upper bound was above the population
size, i.e. 2,033 firms,
census of the population was carried out instead of random
sample selection.
Variables
Given that the purpose of this study is to investigate managers’
awareness regarding
the concept of competitive advantage, two set of variables for
measuring competitive
advantage had to be developed. The first variable was
managers’ self-reported
existence of competitive advantage. In other words, the
respondents indicated whether
their respective firm has competitive advantage or not. The
second variable was a
perceived measure of competitive advantage. Specifically,
competitive advantage was
measured using a subjective scale with various items, each
measuring one of
competitive advantage’s latent characteristics. It goes without
saying that the
managers did not know that the questions answered, were
measuring competitive
advantage’s expressions. Since competitive advantage is a
relative term and therefore
requires an exogenous basis for comparison (Ma, 2000; Arend,
2003; Peteraf and
Barney, 2003), the variable for measuring competitive
advantage was constructed from
the variable of firm competitiveness. Firm competitiveness was
measured using Sigalas
et al.’s (2013) subjective five-point Likert scale. Subsequently,
the dichotomous variable
of competitive advantage, which is the above industry average
firm competitiveness,

was constructed from the comparison of each firm
competitiveness with the average
competiveness of the industry. In particular, the companies that
exhibit higher level of
competitiveness than the mean value were assumed to have a
On the contrary, the companies that exhibit a level of
competitiveness equal or lower
than the mean value were assumed as not having a competitive
advantage.
Data collection
The data were derived from the responses to survey items of
either Chief Executive
Officers, or Chief Financial Officers, or any other C-suite
officers, who are heavily
involved in the strategic management process of their firms.
Since all respondents are
members of top management that participate in the strategic
management process of
their firm, it is assumed that they are all highly qualified to
provide accurate responses
to the survey’s questions and items. All respondents that
participated in the survey,
were assured of confidentiality. The questionnaire, which is the
survey instrument,
2008
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was mailed electronically to all available firms of the sampling
frame. As per Dillman

et al.’s (2009) Tailored Design Method guidelines, several
reminder e-mails, with an
attachment of the questionnaire, were sent after the initial
electronic mailing.
Out of total 2,033 listings in the sampling frame, 286 e-mail
addresses proved to be
defunct and 256 e-mail addresses were not available in the
database of Hellastat.
Pursuant to common practice in business empirical researches,
the response rate was
adjusted for defunct and missing e-mail addresses (see Doving
and Gooderham, 2008).
Of the 1,481 firms that received the questionnaire, 268 usable
completed questionnaires
were received, reflecting an adjusted response rate of 18.1
percent. The response rate of
this survey compares favorably with the response rate
accomplished by e-mail surveys
in the field of strategic management (see Ensley et al., 2002;
Doving and Gooderham,
2008; Mahlendorf et al., 2012). As per common practice
(Armstrong and Overton, 1977),
the independent sample t-tests and non-parametric independent
sample Mann-Whitney
U-tests between early and late respondents, suggest that the
answers of the
respondents and non-respondents do not differ. In addition, the
ANOVA analyses as
well as Kruskal-Wallis tests for the presence of bias among
respondents indicate that
the responses among the various job-titled respondents do not
differ[1].
Analysis and results
The awareness of managers regarding the concept of

competitive advantage was
examined using both quantitative and qualitative data analyses.
The quantitative
analyses include cross-tabulation, χ2-test for independence and
logistic regression of
data from closed-ended questions. On the other hand, the
qualitative data analysis is
comprised of keywords and key phrases of data from an open-
ended question.
The research question of whether the practicing managers are
aware of the concept
of competitive advantage was carried out using cross-tabulation
between the
dichotomous variable of competitive advantage as has been self-
reported by senior
managers (self-reported competitive advantage), and the
dichotomous variable of
competitive advantage developed by the subjective scale of firm
competitiveness
(perceived competitive advantage).
First of all, the Pearson χ2-statistic is statistically significant,
χ2 (df¼ 1)¼ 8.062,
p¼ 0.005, indicating that there is a statistically significant
difference in the proportion
of perceived competitive advantage and the proposition of self-
reported competitive
advantage. Therefore, the interpretation of the cell frequencies
in the contingency table
is warranted. As can be seen from the results of the contingency
table reported
in Table I, 126 managers, or 47 percent of total number of
managers, correctly report
Competitive advantage –

self-reported
Existent Non-existent Total
Competitive advantage – perceived Non-existent Count 97 30
127
Expected count 105.7 21.3
% of total 36 11
Existent Count 126 15 141
Expected count 117.3 23.7
% of total 47 6
Total Count 223 45 268
Table I.
Cross-tabulation
between perceived
competitive
advantage and self-
advantage
2009
Competitive
advantage
that their firms have competitive advantage. In addition, 30
managers, or 11 percent of
the total managers in the study, correctly report that their firms

do not have
competitive advantage. Thus, 58 percent of total managers are
in a position to identify
the existence, or not, of competitive advantage and therefore it
can be assumed that
they are aware of the concept of competitive advantage. On the
other hand, 36 percent
of the total number of managers that corresponds to 97
managers, report that their
firms have competitive advantage when in reality they do have.
Lastly, 15 managers, or
6 percent of the total managers in the study, report that their
firms have not developed
competitive advantage when in reality they have. Thus, a
significant high percentage
of total managers, i.e. 42 percent, are not in a position to
identify the existence of
competitive advantage and therefore it can be assumed that they
are not aware of the
concept of competitive advantage. In addition, from those
managers who are not in a
position to identify the existence of competitive advantage, the
majority (87 percent)
seems to overestimate their company’s ability to develop
Nevertheless, since the result of χ2-test for independence is
statistically significant,
it seems that the competitive advantage as perceived by the
managers and the
competitive advantage as has been self-reported by the
managers are related.
Therefore, based on the interpretation of the contingency table
and on the χ2-test for
independence, no compelling conclusions regarding the
relationship of the two

variables could be drawn at this stage.
In order to reaffirm the above inconclusive results, a robustness
test was performed
using logistic regression with independent variable the self-
advantage and dependent variable the perceived competitive
advantage. From Table II,
one can see that the difference in the log likelihood values
(−2LL) between the base and
proposed model is minimal and that both −2LL values are
considerably greater than
zero, therefore suggesting poor overall fit of the model (Hair et
al., 2010). In addition, the
value of Hosmer and Lemeshow test indicates that the model fit
is not acceptable.
Moreover, the pseudo R2 measures, i.e. Cox and Snell R2 and
Nagelkerke R2, show that
the logistic regression model accounts for less than 4 percent of
the variation between
the two groups of the dependent variable, i.e. existence and
non-existence of
competitive advantage. Based on the above the logistic
regression model does not fit
the data well. Thus, the results of the logistic regression provide
evidence that the
practicing managers cannot identify the existence or non-
existence of competitive
advantage and therefore, they are not aware of the concept of
The empirical investigation of managers’ awareness regarding
the concept of
competitive advantage using quantitative data analyses was
supplemented with
qualitative data analysis. Specifically, the results of managers’

answer to the open-ended
question “what is the competitive advantage of your firm?”
seem to verify the results of
−2 log likelihood (−2LL) of base model 370.795
−2 log likelihood (−2LL) of proposed model 362.648
Difference of −2LL for base and proposed model 8.147
Sig. of χ2-test of −2LL difference 0.004
χ2 of Hosmer and Lemeshow test 0.000
Cox and Snell R2 0.030
Nagelkerke R2 0.040
Note: Dependent variable the perceived competitive advantage
and independent variable the self-
reported competitive advantage
Table II.
Robustness test:
logistic regression
model
2010
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the quantitative data analyses. Using keywords and key phrases
(see Table III),
managers’ responses were classified into the three dominant
theoretical perspectives of
strategic management regarding the sources of competitive
advantage. In particular, of
the 223 total managers who reported that their firm possesses
competitive advantage,
188 accepted to state what their firm’s competitive advantage

is. From those 188
managers, 13 (7 percent) indicated as their firms’ competitive
advantage a source of
competitive advantage pertaining to the industrial organization
theory, such as an entry
or exit barrier. In addition, 55 (29 percent) managers mentioned
a source of competitive
advantage pertaining to market-led theory as their firms’
competitive advantage, such as
cost leadership, differentiation and niche market focus. Lastly,
120 (64 percent) managers
declared a source of competitive advantage pertaining to
resource-based theory as their
firms’ competitive advantage, such as valuable, rare, inimitable
and non-substitutable
resources as well as bundle of tangible or intangible resources,
i.e. capabilities. It is worth
mentioning that 58, or 31 percent, out of total 188 managers,
reported multiple sources of
competitive advantage, belonging to more than one perspective,
as their firms’
competitive advantage. From the above, it is obvious that
practicing managers seem to
confuse the concept of competitive advantage with the concept
of sources of competitive
advantage. In addition, the majority of senior managers seems
to confuse competitive
advantage with several of their firm’s resources and
capabilities, which are in fact
sources of competitive advantage under the resource-based
theory. The above finding is
not entirely surprising, given that the resource-based theory not
only serves as a major
theoretical foundation in strategic management (Rouse and
Daellenbach, 2002), but also it
is prominently featured in all major textbooks on the subject of

business strategy
(Newbert, 2007). Thus, since much of what the strategy scholars
write about, and teach
has been greatly influenced by the resource-based perspective,
the managers that have
received business education will tend to adopt its fundamental
arguments.
Concisely, the combined results of the quantitative data
analyses and the qualitative
data analysis, provide empirical evidence that self-reported
perceived competitive advantage are not empirically equivalent.
In other words, the
practicing managers seem not to be aware of the concept of
they tend to confuse it with its sources, especially those
pertaining to resource-based
theory.
Concluding remarks
Even though in literature there are studies that investigate
managers’ awareness of
various popularly used management concepts (see Van Rossem
and Van Veen, 2011),
little research has been carried out in order to investigate
empirically the awareness of
managers regarding competitive advantage. This paper intends
to shed some light into
managers’ awareness of competitive advantage, which is the
most taken-for-granted
concept of strategic management.
Competitive advantage is a buzzword, fuzzy and fashionable
concept that causes
confusion to practicing managers, as academics have a tendency

to use the term of
competitive advantage with different meaning in different
contexts. In view of the fact
that competitive advantage has always suffered from a lack of
semantic content along
with the fact that many journals and textbooks seem to define
competitive advantage in
terms of its sources, or the concept of performance, it is
doubtful that the practicing
managers are aware of the concept of competitive advantage.
Indeed, this study provides
empirical evidence that practicing managers seem to confuse the
concept of competitive
advantage with the concept of sources of competitive advantage,
especially those
2011
Competitive
advantage
Industrial organization theory Market-led theory Resource-
based theory
1. Biggest in the industry (EEB)
2. Binding agreements with suppliers
and customers (EEB)
3. Distance – low transportation cost
(EEB)
4. Economies of scale (EEB)
5. Exclusive products (EEB)
6. Geographical location (EEB)

7. Large network size (EEB)
8. Monopolistic position (EEB)
9. Plant/production site (EEB)
10. Reciprocate subsided fee (EEB)
11. Size (EEB)
12. Strong market share (EEB)
1. Better quality compared with peers
(DIF)
2. Competitive prices (DIF)
3. Competitive products/services
(DIF)
4. Different products/services from
competition (DIF)
5. Differentiation (DIF)
6. Entrance in new markets (NMF)
7. Focus (NMF)
8. Innovation of products/services
(DIF)
9. Local company (NMF)
10. Low price compared to value (CL
and DIF)
11. Lowest cost (CL)
12. Market leader (CL and DIF)
13. Market position (CL and DIF)
14. Particularization/customization
(DIF)
15. Premium products/services (DIF)
16. Price of products/services (CL)

17. Product/service concept (DIF)
18. Quality of products/services (DIF)
19. Relationship between quality and
price (CL and DIF)
20. Reliability of products/services
(DIF)
21. Renown products/services (DIF)
22. Strong brand name (DIF)
23. Value for money (CL and DIF)
24. Wide recognition of products/
services (DIF)
1. Active/supportive
shareholders (IFR)
2. Adoption of new
technologies (IC)
3. Capacity for new product
development (IC)
4. Company’s nationality (IFR)
5. Company’s reputation (IFR)
6. Competent human capital
(IFR)
7. Customer service (IC)
8. Customer-focussed
approach (IC)
9. Experience (IC)
10. Facilities/warehouse /fleet of

trucks (IFR)
11. Financial liquidity (IC)
12. Financial strength (IFR)
13. Focus on customers’
needs (IC)
14. Internal procedures (IC)
15. Know-how (IC)
16. Knowledge/expertise (IC)
17. Low labor cost (IFR)
18. Low operating cost (IC)
19. Marketing and distribution
(IC)
20. Member/subsidiary of a
strong group (IFR)
21. Not an impersonal company
(IC)
22. Operational flexibility (IC)
23. Operational robustness (IC)
24. Process innovation (IC)
25. Product portfolio (IC)
26. Production capacity (IC)
27. Production cost (IC)
28. Prompt decision making (IC)
29. Quality of processes (IC)
30. Research and development
(IC)
31. Solvency/credibility (IC)
32. Strong management (IC)
33. Tangible assets and
equipment (IFR)

34. Teamwork (IC)
35. Technological infrastructure
(IFR)
36. Training of human capital
(IFR)
Notes: EEB, entry and exit barriers; CL, cost leadership; DIF,
differentiation; NMF, niche market
focus; IFR, idiosyncratic firm resources; IC, idiosyncratic
capabilities
Table III.
Keywords and key
phrases for the
classification of
manager’s responses
into the dominant
theoretical
perspectives of
strategic
management
2012
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53,9
pertaining to resource-based theory. The above finding can be
attributed to the fact that
since the resource-based theory is universally accepted in
strategic management courses
and textbooks, managers are educated and instructed to find

competitive advantages
extensively among their firms’ idiosyncratic resources and
capabilities.
From an academic standpoint, by empirically investigating the
awareness of
managers regarding competitive advantage, this study fills an
important gap in the
empirical literature. The finding that practicing managers
confuse the concept of
competitive advantage with their firms’ idiosyncratic resources
and capabilities,
provides support to the hypothesis that senior managers are not
aware of the concept
of competitive advantage. The results of this study could
stimulate the discussion
about the conceptual nature of competitive advantage and could
foster the convergence
toward a precise and robust definition of competitive advantage.
From a practitioner standpoint, the findings of the study along
with the provided
stipulative definition of competitive advantage from literature,
can increase practicing
managers’ awareness relating to the conceptual nature of
competitive advantage. The
improved understanding of its conceptual nature by practicing
managers, in turn, can
specify the latent expressions of competitive advantage,
describing what is and what
not competitive advantage is. This is extremely important
because such cognitive
error, regarding the concept of competitive advantage, results to
deviation from the aim
of business strategy. In other words, because managers’
decisions concerning the

development of competitive advantage are based on erroneous
information about the
true content of competitive advantage, firms may often and
mechanically implement
resource-based strategies that do not result in superior
performance. Therefore,
practicing managers should bear in mind that sources of
competitive advantage,
competitive advantage and superior performance are distinct
concepts (see Figure 1).
The sources of competitive advantage are the mobility barriers
(factors that impede the
ability of firms to enter or exit an industry), the market
positions (low cost,
Sources of Competitive
Advantage
1. Industrial organization
theory: Mobility barriers
(entry and exit barriers)
2. Market-led theory: Market
positions (cost leadership,
differentiation and niche
market focus)
3. Resource-based theory:
Idiosyncratic firm resources
(valuable, rare, inimitable
and non-substitutable
financial, physical, human,
relational resources)
Idiosyncratic capabilities
(competencies derived from
a bundle of valuable, rare,

inimitable and non-
substitutable tangible or
intangible resources)
Competitive
Advantage
Above industry
average manifested
exploitation of
market
opportunities and
neutralization of
competitive threats
Superior
Performance
Above industry
average financial
and operational
performance
Figure 1.
Concepts and
relationships of the
“sources of
competitive
advantage-
competitive
advantage-superior
performance”

conceptual
framework
2013
Competitive
advantage
differentiation or niche market focus), as well as the
idiosyncratic firm resources
(valuable, rare, inimitable and non-substitutable financial,
physical, human, relational
resources) and capabilities (competencies derived from a bundle
of valuable, rare,
inimitable and non-substitutable tangible or intangible
resources). On the other hand,
competitive advantage is the above industry average manifested
exploitation of market
opportunities and neutralization of competitive threats, whereas
superior performance
is the above industry average financial and operational
performance. For managers,
the challenge should be to ex ante identify, develop, protect and
deploy idiosyncratic
firm resources and capabilities, and/or market positions, and/or
mobility barriers
(which are all sources of competitive advantage), as grounds for
establishing
competitive advantage (i.e. above average exploitation of
market opportunities and
neutralization of competitive threats) and, thereby, generate
superior performance
(i.e. above average financial and operational performance).

Naturally, due to the lack of previous efforts to investigate
empirically managers’
awareness regarding the concept of competitive advantage and
because of the
contradicting results of χ2-test for independence as compared to
the interpretation of
contingency table, logistic regression results and to keywords
and key phrases data
analysis, the findings presented herein need further
investigation. In finding further
support of the hypothesis that senior managers are not aware of
the concept of competitive
advantage, scholars will have more rigorous evidence about the
impairing effect to
practicing managers’ awareness caused by the lack of a clear
theoretical definition for the
concept of competitive advantage. This, in turn, would
hopefully strengthen the efforts of
academics to reach a consensus regarding the conceptual nature
of competitive advantage.
Note
1. Results of t-tests, Mann-Whitney U tests, ANOVA analyses
and Kruskal-Wallis tests are not
reported herein but they are available upon request.
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