PPT file presented in Eastern Academy of Managament_2013

1. The relationship between quality and
environmental management systems
and business performance
Vera Ferrón Vílchez
Universidad de Granada
Nicole Darnall
Arizona State University

2. Introduction (1/4)
• Managements systems are continual improvement
processes designed to enhance a facility’s overall
operating efficiency.
• By 2011, approximately 1,110,000 facilities had certified
their QMSs to ISO 9001 which represents a 30%
increase over the 5 years prior
• Nearly 250,000 facilities had certified their EMSs to
ISO 14001 representing a 56% increase over the 5 years
prior

3. Introduction (2/4)
• Douglas, T.J., Judge, W.Q.
(2001). Academy of
Management Journal
• Kaynak, H. (2003). Journal of
Operations Management
• Powell, T.C. (1995). Strategic
Management Journal
• Sharma, D.S. (2005). The
International Journal of
Accounting
• Darnall, N., Henriques, I.,
Sadorsky, P. (2008). Journal of
International Management
• Klassen, R.D., McLaughlin,
C.P. (1996). Management
Science
• Hart, S.L., Ahuja, G. (1996).
Business Strategy and the
Environment
• Russo, M.V., Fouts, P.A.
(1997). Academy of
Management Journal

4. Introduction (3/4)
What about simultaneous
adoption?????

5. Introduction (4/4)
Benefits EMS OR QMS
•To improve operational
efficiencies
•To reduce waste in productive
process
•To enhance routine internal
processes that foster innovation
Benefits EMS AND QMS
•The marginal cost of adopting
the 2nd MS is LESS…
•Efficiency benefits DEEPER
•Reputational and goodwill
benefits
•Other combined benefits
QMS/EMS
Separately
QMS/EMS
Together

6. Objective
To analyze whether facilities that adopt both QMS
and EMS achieve more improved business
performance than facilities that implement one
or neither management system…
… after controlling for the self-selection bias
related to the QMS and EMS adoption decisions

7. Combining QMS and EMS (1/2)
Different
Foci
QMS: Client satisfaction and quality
improvement
EMS: environmental improvements
These differences create oportunities to
improve business performance !!!

8. Combining QMS and EMS (2/2)
Efficiency
Benefits
Goodwill
Benefits
Combined
Benefits
QMS: improving product quality; reducing customer complaints
EMS: eliminating unnecessary purchasing; reducing waste
QMS: preferential treatment; customer loyalty; improved image
EMS: env. clients, regulators, community, env. groups
If only QMS: missing stakeholders who value env. concerns
If only EMS: missing clients who value production quality

9. Hypothesis
Compared to facilities that adopt no management systems,
facilities that adopt both QMS and EMS are more likely
to be associated with positive business performance than
facilities that adopt only one of these management systems.

10. Methods (1/2)
• Data: OECD Survey
• n = 2,619 facilities (response rate = 21.4%)
• Dependent variable: Business performance
• Explanatory variables: QMS and EMS, QMS only, and
EMS only (any MS is the reference category)
• Control variables: primary customers, market
concentration, publicly traded, size, country, sector
• Instrumental variables: ability to compete on quality,
government encourgament EMS + other control
variables.

11. Methods (2/2)
Empirics: Multivariate probit estimation
Eq. 1: (prob business performance = 1) = ƒ (QMS only,
EMS only, QMS/EMS, control variables, εi1 )
Eq. 2: (prob QMS only = 1) = ƒ (importance of quality,
government encourage EMS, control variables, εi2 )
Eq. 3: (prob EMS only = 1) = ƒ (importance of quality,
government encourage EMS, control variables, εi3 )
Eq. 4: (prob QMS/EMS = 1) = ƒ (importance of quality,
government encourage EMS, control variables, εi4 )

12. Equation 1—Dependent variable: Business performance Coefficient Std. Error
Explanatory Variables
QMS only .269** .133
EMS only -.139 .310
QMS_EMS .625*** .143
Control Variables
Households .138 .095
Wholesalers .169** .062
Market concentration (5-10) -.172** .066
Market concentration (>10) -.244*** .067
Publicly traded .019 .084
Size .026 .028
Germany .079 .118
Japan -.583*** .110
Norway .107 .143
France -.143 .142
Canada .513*** .143
Food, beverage, textiles -.033 .101
Pulp, paper, print -.003 .147
Petroleum, chemicals, rubber production -.132 .114
Machinery, media equipment -.139* .083
Transport equipment -.296*** .080
Constant .089 .177
Overall Model Statistics
rho12 .243
rho13 .047
rho14 -.154*
rho23 -.099**
rho24 -.255***
rho34 -.859***
Likelihood ratio test rho12=rho13=rho14=rho23=rho24=rho34=0 1,137.91***
Wald test χ2 936.28***
N 2,619
Results (1/2)

13. Equation 2:
QMS Only
Equation 3:
EMS Only
Equation 4:
QMS and EMS
Variable Coeff. S.E. Coeff. S.E. Coeff. S.E.
Ability to compete on quality .017 .067 -.142 .096 .224*** .062
Government encouragement of EMS -.379*** .070 .156* .092 .479*** .059
Importance of natural resource use -.193*** .040 .068 .061 .337*** .038
Market scope -.030 .029 -.070 .043 .294*** .087
Firm’s head office in foreign country -.178* .099 -.126 .146 .154*** .028
Market concentration (5-10) .029 .068 -.168 .102 .082 .063
Market concentration (>10) -.100 .069 -.066 .100 .143** .064
Publicly traded -.351*** .084 -.228** .117 .506*** .072
Germany .655*** .120 -.834*** .154 -.225** .102
Japan .175 .120 -.807*** .146 .416*** .101
Norway .613*** .143 -.843*** .198 -.085 .124
France .327** .147 -.732*** .196 .235* .126
Canada .437*** .144 -.361** .173 -.136 .123
Food, beverage, textiles -.003 .094 .097 .143 -.632*** .087
Pulp, paper, print -.347** .145 .430** .188 -.374** .127
Petroleum, chemicals, rubber -.220* .115 .277* .159 -.296** .101
Machinery, media equipment .157* .084 -.138 .139 -.132* .079
Transport equipment .070 .083 -.109 .137 -.044 .078
Constant
-.247 .238 -.313 .327 -2.186*** .216
Results (2/2)

14. Conclusions (1/2)
• The simultaneous adoption of QMS and EMS is
associated with positive business performance
– Synergies related to complementary goals of
achieving higher levels of operational efficiencies
– Improved social legitimization:
• QMS  supply chain stakeholders
• EMS  other external stakeholders

15. Conclusions (2/2)
• No significant difference between business
performance of EMS adopters compared to
QMS&EMS adopters
• Controlling for selection bias problems of the
relationship between business performance and
QMS/EMS adoption.

16. Limitations & Future Research
• What is the optimal sequence?
• Longitudinal analysis (instead of cross-sectional
data)
• Other business performance measures (instead
of subjetive/survey measures)
• Less developed countries (instead of OECD
countries)
• Across non-manufacturing sectors

17. THANKS!!
Any suggestion??
Vera Ferrón Vílchez
http://veraferron.wordpress.com