Int. J.

Production Economics 158 (2014) 197–207

Contents lists available at ScienceDirect

Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

ISO 9000 quality system certification and its impact on product and
process innovation performance
Milé Terziovski a,n, Jose-Luis Guerrero b,1
a
Curtin Graduate School of Business, Curtin University of Technology, Australia
b
McDonough School of Business, Georgetown University, Washington, DC, United States

art ic l e i nf o a b s t r a c t

Article history: ISO 9000 quality system certification has been widely applied around the world, but with mixed success.
Received 5 April 2011 A review of the literature revealed gaps in research in this area of quality/operations management,
Accepted 12 August 2014 particularly in the empirical testing of the effects of ISO 9000 certification on innovation performance.
Available online 21 August 2014
This study examines the impact of ISO 9000 certification on product and process innovation
Keywords: performance of 220 Australian organizations. Our results show that ISO 9000 certification does not
Innovation performance have a statistically significant relationship with product innovation performance measures such time-to-
ISO 9000 certification market (TTM) of new products. ISO 9000 certification tends to drive out variance increasing activities,
Restructuring which in turn affects the organization's ability to innovate. Conversely, ISO 9000 certification has a
Internal customer concept
positive and significant impact on process innovation performance measures such as restructuring and
application of the internal customer concept. ISO 9000 certified firms are more likely to include
restructuring, and to apply the internal customer concept throughout their organization to improve
cooperation and to create flatter structures as part of their process innovation activities. The findings of
this study have implication for managers and auditing bodies. Managers should exercise caution when
choosing processes to certify, and auditing bodies should consider the paradox between product
innovation and process innovation in the next revision of the ISO 9000 standard.
& 2014 Elsevier B.V. All rights reserved.

1. Introduction However, research on the relationship between ISO 9000

certification and innovation performance has been mostly anec-
There has been a major push by organizations around the world to dotal. For example, a Business Week article by Hindo (2007)
seek certification to the ISO 9000 quality standard since its introduc- argues that efficiency programs such as ISO 9000 certification
tion in 1987 (Casadesus and Karapetrovic, 2005; Corbett et al., 2005; are designed to reduce variation and eliminate waste, that could
Stevenson and Barnes, 2001; Terziovski et al., 1997). Although the ISO potentially stifle innovation (Terziovski et al., 2003; Corbett et al.,
9000 standard has undergone several changes over the past two 2005; Naveh and Erez, 2004; Naveh and Marcus, 2005).
decades and continues to be adopted by thousands of organizations Academic research conducted by Gotzamani et al. (2002) draws
throughout the world, there are significant gaps in the literature on similar conclusions that ISO 9000 certification increases bureau-
empirical studies which test the strength of the relationship between cracy and reduces innovation, and that the most important benefit
ISO 9000 certification and innovation performance (Henkoff, 1993; gained from ISO 9000 certification is improvement of internal
Guler et al., 2002; Naveh and Erez, 2004; Naveh and Marcus, 2005; processes. On the other hand, Benner and Tushman (2003) argue
Corbett et al., 2005). that ISO 9000 certification may be more productive in stable
Considerable research has been done on the impact of the ISO environments where process innovation is more prevalent. Naveh
9000 standard on operational and business performance (Corrigan, and Erez (2004) report similar findings based on a longitudinal
1994; Henkoff, 1993; Stephens, 1994; Adler, 1999; Terziovski et al., study, which concluded that ISO 9000 certification positively
2003; Corbett et al., 2005; Naveh and Erez, 2004; Naveh and Marcus, affected attention to detail but negatively affected product innova-
2005; Guler et al., 2002). tion. In other words, when attention to detail and adherence to
rules increased, innovation decreased.
n
A paradox has emerged from the above discussion. On one
Corresponding author. Tel.: þ 61 8 9266 7900.
hand, managers are striving to reduce variation of their processes
E-mail addresses: [email protected] (M. Terziovski),
[email protected] (J.-L. Guerrero). and hence improve quality and delivery of their products in full on
1
Tel.: þ1 202 687 4338. time. On the other hand, product innovations call for different

http://dx.doi.org/10.1016/j.ijpe.2014.08.011
0925-5273/& 2014 Elsevier B.V. All rights reserved.
198 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207

organizational skills that are based on learning from experimenta- Karapetrovic, 2005; Corbett et al., 2005; Stevenson and Barnes,
tion about customer need patters and learning from product failure 2001; Terziovski, et al., 1997). Similarly, there are many definitions
(Burgelman et al., 2004; Benner and Tushman, 2002; Hindo, 2007; of innovation in the literature. Innovation is often defined in the
Damanpour and Gopalakrishanan, 2001). We need to flesh-out the context of product and process innovation (Dougherty, 1992). For
apparent paradox prior to articulating our research question example, Gopalakrishan and Bierly (2001) emphasize that product
(Terziovski, 2010). innovation relies on a competitive strategy based on differentia-
Firstly, if we assume that ISO 9000 certification does not have a tion, while process innovation relies on a cost leadership strategy
positive and significant effect on process innovation performance (Gopalakrishan and Bierly, 2001; Bessant and Tidd, 2007;
and it does, then we are likely to miss out on the benefits of Damanpour, 1991).
increased formalization. For example, Prakash and Gupta (2008), We have adopted the Oslo Manual (2005) definition of innova-
argue that establishing organizational standards leads to employee tion for the purpose of this study: “…the implementation of new or
commitment and an increase in organizational effectiveness. In significantly improved product (good or service), or process, a new
addition, Adler (1999) argues that large-scale complex organiza- marketing method, or a new organizational method in business
tions need some formalized procedures in order to assure effi- practices, workplace organization or external relations.” (p. 9). Next
ciency, conformance quality and timeliness. we address the question of how to measure innovation perfor-
On the other hand, if we assume that ISO 9000 certification mance? This question has been debated in the literature for quite
does have a positive and significant effect on product innovation some time (Damanpour, 1991; Molina-Azorín et al., 2009). For
performance, and it does not, then we are likely to stifle product example, Keupp et al. (2011), based on a systematic review of the
innovation performance. Adler (1999) further argues that organi- literature of 342 articles on the strategic management of innova-
zations performing non-routine tasks and whose primary goal is tion concluded that “…the majority of studies that analyse innova-
innovation, such as the 3M organization, should be less bureau- tion outcomes employ a dependent variable which is based on
cratic and hence provide more focus on product innovation. patents, new product development or financial performance. The
Swann (2010) summed up the paradox very well by stating that performance of process innovation is particularly hard to measure…”
“…the most innovative firms are good at finding information in (p. 15).
standards, and, because they are ‘pushing the boundary’, they also The authors recommend that future studies should use depen-
find that regulations constrain their innovative activities.” (p. 1). dent variables that are “…closely related to process innovation but
Based on the paradox discussed above, the objective of this paper underrepresented as dependent variables.” (p. 15). Given the
is to address the research question: Does ISO 9000 certification process-centred approach of the ISO 9000 standard with a focus
stifle innovation performance? The study makes a contribution on conformance, it is reasonable to assume that ISO 9000
to the literature by testing the strength of the relationship certification is likely to have a stronger relationship with process
between ISO 9000 quality systems certification and product and innovation rather than product innovation performance (Marash
process innovation performance. The study makes a further con- and Marquardt, 1994; Manders, 2012).
tribution through the application of the methods and techniques
used to identify the influence of ISO 9000 certification on selected
innovation performance variables illustrating how theories can be 3. Development of hypotheses
tested. Finally, the paper articulates implications for managers,
researchers and accrediting bodies. Based on the discussion above, we follow the advice from Keupp
et al. (2011), to employ dependent variables in the development of
the hypotheses which are underrepresented in the literature.
2. Literature review and development of hypotheses
However, given the comment from Subramanian and Nilakanta
(1996) that “there is no prior research to guide the formulation of
In the following section we review the literature in order to
specific hypotheses about substantive relationships between each
establish a theoretical foundation based on past research and to
dimension of organizational innovativeness…” (p. 637), our study
develop research hypotheses (Sekaran, 1992). We briefly reflect on
should be considered exploratory in nature.
the changes that have taken place of the ISO 9000 standard,
In the following section, we discuss the potential impact of ISO
followed by definitions of key concepts, and the justification of the
9000 certification on product and process innovation perfor-
research hypotheses (Sarkis, 2003; Psomas and Fotopoulos, 2009).
mance, leading to the justification of our hypotheses (see Fig. 1).
A new version of the quality standard, ISO 9001:2008 was
The operationalization of the constructs included in the hypothe-
introduced in November 2008 to replace the ISO 9000:2000
sized relationships below are justified in the methodology section
version. A consistent view has emerged from the literature that
under the heading “Dependent construct measures”.
the latest standard does not introduce any significant new require-
ments. Chinvigai and Mhamedi, 2007) confirm that “ISO 9001:2008
has little or minor changes from ISO 9001:2000. No new requirement 3.1. Relationship between ISO 9000 certification and time of
and no significant change, rather than the clarification of some innovation adoption
points…” (p.2). This is an important conclusion from the literature,
given that our study was conducted with the earlier version of the Subramanian and Nilakanta (1996) define innovation adoptions
ISO 9000 standard (Daniels, 1999). as “…organizational responses to external environmental changes.”
(p. 632). Therefore, time of innovation adoption is important from a
2.1. Definitions ‘first mover advantage’ which can be potentially gained by firms
that adopt innovations earlier than their competitors (Subramanian
In this section we define quality, innovation and innovation and Nilakanta, 1996). The authors propose that future studies on
performance, leading to the development of the hypotheses. There innovation adoption should utilize time-based measures for pro-
are many definitions of quality in the literature, depending on the duct innovation performance. Hence, we adapted the Damanpour
context. The ISO 9000 quality standard is based on the confor- and Evans (1990) approach (in Subramanian and Nilakanta, 1996),
mance definition of quality to assure customers that a quality who measured innovativeness as the mean number of innovation
product or service will be supplied consistently (Casadesus and adoption over a period of time (Bessant and Tidd, 2007).
 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207 199

Product Innovation 9000 certified firms in Hong Kong. The study tested the effects of
Performance ISO 9000 certification on several dimensions of operational
- Time of innovation adoption performance and concluded that reduction in “lead time” or TTM
H1, H2, H3 - Time to Market (TTM) received the lowest score. Lee (1998) concluded that “…short lead
ISO 9000 - Ecological efficiency
time might be achieved easier with the adoption of new technologies
Quality System
Certification
and equipment, which was out of the scope of ISO 9000.” (p. 168).
Process Innovation Similarly, Manders (2012), reports on a research study of
H4, H5 Performance several hundred companies in Taiwan, which found that the
- Restructuring implementation of ISO 9000 certification had a negative and
- Internal customer concept
significant effect on product innovation performance. The study
concluded that ISO 9000 certification resulted in a culture of
attention to detail and not a culture of innovation. This is
consistent with research findings in the photography industry by
Benner and Tushman (2002) that as process management activ-
ities, such as ISO 9000 increased, product innovation decreased.
The other school of thought is that there are potential benefits
Fig. 1. Theoretical model. to be gained from ISO 9000 certification if the organization pays
particular attention to the implementation phase. For example, Yin
and Shmeidler (2009) based on a research study found significant
It is important to briefly characterize the innovation cycle, variability in the implementation of the ISO 9000 standard,
which consists of the following stages: conception, proposition, confirming that “…it seems to be a common phenomenon that
adoption/implementation (Pierce and Delbecq, 1977; Damanpour, standardised management tools could be implemented very differ-
1991; Klein and Sorra, 1996). The type of organizational structure ently…” (p. 470). Yin and Shmeidler (2009) statement may explain
required for the different phases of the innovation cycle remains the contradictory findings from the literature. Following the above
unclear in the literature. For example, Damanpour (1991), based discussion, we predict that ISO 9000 certified firms would have
on a theoretical paper argues that a mechanistic organizational shorter TTM. This leads to our second Hypothesis H2: ISO 9000
structure is less conducive to the adoption of innovation phase certification has a positive and significant effect on the lead time of
than a more organic structure. new products to market.
On the other hand, Pierce and Delbecq (1977) argue that some
formalisation of decision processes is required during the adoption/ 3.3. Relationship between ISO 9000 and ecological efficiency/degree
implementation phase of the innovation cycle in order to imple- of recycling
ment policies and procedures. This is consistent with Kaziliunas
(2010) based on a research study who concluded that “the more Ecological efficiency/degree of recycling of products is becom-
mechanistic and explicit knowledge based organizations will enjoy ISO ing an important issue for the development of new products.
certification while the more organic and tacit knowledge organizations Kleindorfer et al. (2005) argue that oganisations “…Do not pay
will experience tensions arising from a lack of fit” (p. 87). attention to the end-of-life recovery of materials or energy, nor to
However, this may not always be the case. For example, the proper disposal issues.” (p. 488). The authors argue that a paradigm
Community Innovation Survey for Luxembourg, in Mangiarotti shift is required to recognize the importance of sustainable
and Rillo (2010), found that ISO 9000 certification has a positive development in product design (Hart and Gautam, 1996).
and statistically significant effect on non-technical innovation such According to Kleindorfer et al. (2005) organizations lack account-
as marketing (Mangiarotti and Rillo, 2010). Adler (1999) provides a ability for “…the energy and resources used and the resulting footprint
pragmatic view, arguing that managers need to be selective in they leave behind.” (p. 484). In order to encourage firms to meet their
terms of when and where to adopt ISO 9000 certification. environmental obligations, a performance scorecard was introduced
From the above discussion it seems that there is a role for the called the Triple Bottom Line reporting, which takes into account three
ISO 9000 standard to play in the adoption/implementation phase key areas: environmental; economic and social measures (World
of the innovation cycle. Therefore, we predict that ISO 9000 Commission on Environmental Development (WCED), 1987). Eco-
certified firms would adopt innovations quicker than non-ISO logical efficiency/degree of recycling is part of the environmental
certified firms. This leads to our first Hypothesis 1: ISO 9000 performance measures (Kleindorfer et al., 2005).
certification has a positive and significant effect on the time of Whilst ecological efficiency can be a measure of both product
adoption of product innovation. and process innovation, Damanpour and Gopalakrishanan, 2001
argue that product innovations are seen as more significant
3.2. Relationship between ISO 9000 certification and time to market because customers are willing to pay higher prices for ecologically
(TTM) efficient and environmentally friendly products. For example,
Shrivastava (1995) claim that firms that implement sustainable
With the rapid advances in technology and the spread of development practices in order to produce environmentally
globalization, organizations are striving to reduce TTM of new friendly products would achieve increased benefits.
products. Various approaches have been used by managers to Shrivastava (1995) used a case study on the 3M organization to
speed up the product innovation process, for example, through the demonstrate how ecologically efficient products enabled the
implementation of cross-functional teams, collaboration with organization to reduce operating costs and to improve corporate
customers and suppliers, technology or internal or external performance and firm reputation. The author argues that stan-
organizational systems (Dougherty, 1992; Crawford, 1992; Klein dards and regulation would encourage firms to respond to
and Sorra, 1996; Burgelman et al., 2004; Keupp et al., 2011). environmental problems. Miles et al. (1999) support this view,
Some authors argue for less structure to reduce TTM. For arguing that competitive advantage could be achieved if appro-
example, Crawford (1992) argues that reducing TTM of a product priate strategies, systems, and standards are put in place simulta-
development project offers a quick response with new products to neously (Banerjee, 2001; Bansal, 2005). Following from the above
market changes. Lee (1998) conducted an empirical study of ISO discussion, we predict that ISO 9000 certified firms are likely to
200 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207

develop more ecologically efficient and recyclable products. This operating advantages, not uniformity as intended by the creators of
leads to our third Hypothesis H3. ISO 9000 certification has a ISO 9000 standard.” (p. 23).
significant and positive effect on ecologically efficient and recyclable The authors conclude that point of differentiation could be
products. achieved if firms were encouraged to focus on improving perfor-
mance through the ISO 9000 certification implementation process,
3.4. Relationship between ISO 9000 certification and restructuring rather than the standard conformance approach to gain the ISO
9000 certificate (Ebrahimpour and Johnson, 1992). Based on the
Restructuring is necessary for organizational survival. above, we predict that the adoption of ISO 9000 certification
Narayanan (2001) identified formalisation and centralization as would have a significant and positive effect on process innovation,
two potential impediments of innovation performance. According underpinned by the internal customer concept. This leads to our
to Narayanan (2001), informal communication and a more open fifth Hypothesis H5: The relationship between ISO 9000 certification
climate would tend to facilitate process innovation, arguing that and process innovation underpinned by the internal customer con-
the prime facilitators of innovation activity are informal organiza- cept is positive and significant.
tional structures designed to encourage new ideas.
On the other hand, some authors take a more balanced view.
For example, Douglas and Judge (2001) discuss Shea and Howell's 4. Research methodology
(1998) argument that an organization needs to have a two
dimensional approach to structure: “…standardisation of TQM In this section we discuss the research methodology. The unit
techniques and feedback loops helps an organisation control its of analysis was the company. Quantitative data was gathered
systems and processes. However, decentralisation is also necessary through a random survey from site managers in the manufactur-
to allow employees to explore and experiment with creative process ing, service, and computer and construction industries as part of
improvement ideas.” (p. 159). an Australian Research Council (ARC) Discovery Project. The
There is strong research-based evidence in the literature that population was selected from a Dunn and Bradstreet data file of
supports the relationship between ISO 9000 certification and TQM 20,000 companies based on 12 industry codes of the Australian
practice. For example, a study by Han et al. (2007) based on data Standards Industry Classification (ASIC) system. The data set was
collected from 441 ISO 9001 certified companies concluded that designed based on three size categories defined by the Australian
“… ISO 9000 might be a good first step to total quality.” (p. 1). Bureau of Statistics (1999): “small” (20–49 employees), “medium”
Overall, there is considerable convergence in the quality (50–99 employees) and “large” (100 or more employees). The final
management practices adopted by ISO 9000 and TQM. Hence we composition of the data set was 1000 companies. The survey
developed our restructuring hypothesis based on the TQM litera- instrument was administered between October and December
ture, which has a much stronger theoretical foundation than the 2006. After checking responses 220 questionnaires were valid,
ISO 900 standard (Davenport, 1993; Powell, 1995; Douglas and which produced a response rate of 22%.
Judge, 2001; Samson and Terziovski, 1999; Kaynak, 2003).
Hence we predict that ISO 9000 certification would facilitate 4.1. Respondent profile
restructuring of process innovation. This leads to the fourth
Hypothesis H4: Adoption of ISO certification has a positive and Sixty-five percent of the respondents were CEOs, Managing
significant effect on restructuring of process innovation. Directors and General Managers. An analysis of the ownership of
companies by size (using Australian sales) shows that 112 com-
3.5. Relationship between ISO 9000 certification and the internal panies were privately owned with annual sales of under $50
customer concept million. Most of the small companies were privately owned, with
82 respondents having sales below $10 million. Public companies
One of the key objectives of the ISO 9000 standard is to ensure that were both large and small, with 17 companies over $50 million
the structure and interrelationships are visible and clear to all sales. Foreign owned companies were mainly large, with 9 com-
concerned. According to Goult (2009) “…It creates the process inter- panies having sales over $50 million.
linkage between functional activities, and is used to document the
responsibilities and authorities of operational functions.” (p. 42). The 4.2. Measurement instrument
internal customer concept is one of the underpinning principles of
TQM (Samson and Terziovski, 1999; Evans and Lindsay, 2008). Many The measurement instrument used in this study was originally
organizations have implemented the TQM philosophy, which is developed for an Australian Research Council Discovery Project
further underpinned by continuous improvement of processes, team- study. Questions associated with ISO 9000 and innovation perfor-
work leading to customer satisfaction (Samson and Terziovski, 1999; mance were included in the survey instrument. The questions in
Flynn et al., 2004). Narayanan (2001) reinforces the point that the survey instrument were designed using the 5-point modified
communication and a more open climate where employees see Likert scale. The survey instrument was pilot tested in 25 organi-
themselves as internal customers and suppliers would facilitate zations chosen at random.
process innovation (Narayanan, 2001; Flynn, et al. 2004). The independent construct of interest in this study is the degree
Douglas, Judge (2001) based on an empirical study found that of ISO 9000 certification (Table 1 in the Appendix A), derived from
standardization of some TQM practices would facilitate control of
systems and processes and conclude that “…control and learning Table 1
are mutually reinforcing.” (p. 165). Zuckerman and Hurwitz (1996) Independent variable: ISO 9000 certification. (5.8.h) Where does your organization
fit in relation to ISO 9000 certification or other relevant industry standards (please
further reinforce the above, claiming that the ISO 9000 quality
circle ONE number only).
system helps to resolve work procedure inconsistencies, and
conflict between formal and informal communication flows. a Already certified and seeking further upgrading 1
However, Naveh and Marcus (2005), based on an empirical b Already certified 2
study found that the ISO 9000 standard could produce incon- c Currently undergoing certification 3
d Seeking certification within the next 12 months 4
sistent results if it is not implemented as a catalyst for change, e No immediate plans for certification 5
stating that “The different level of implementation yield firm-specific
 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207 201

Table 2
Dependent variables (excerpts from questionnaire).

Related Questions Dependent ordinal variables 1 2 3 4 5

hypotheses questionnaire

Product innvotation variables

H1 6.1 (b)2 The time of innovation adoption o 1 year 1 year 2 years 3 years o 3 years
H2 6.1 (c) Time to market (TTM) 1 year 2 years 3 years 4 years 5 years
H3 6.1 (g) Ecological efficiency/degree of recycling Very low Low Satisfactory High Very high
Process innovation variables
H4 5.8 (d) Restructuring Strongly disagree Strongly agree
H5 5.8 (e) Internal customer concept Strongly disagree Strongly agree

Question 5.8 of the survey instrument (Australian Research Coun- process “A major requirement of the ISO 9000 standard is that
cil (ARC) Discovery Project Survey Instrument, 2005). Site man- organisations develop and implement a set of routines and procedures
agers gave their perceived responses on a Likert scale of 1 “already for product design, manufacturing, delivery, service and support…”
certified and seeking further upgrading” to 5 “no immediate plans for (p. 1578), this is consistent with the latest criteria of the ISO 9000
certification”. standard. Therefore, we have chosen Time of Innovation Adoption as
The dependent constructs of interest in this study are product an important variable to include in the product innovation con-
innovation performance and process innovation performance struct (Poolton and Ismail, 2000).
included as Question 6.0 of the survey instrument. Site managers
gave their perceived responses as part of ordinal variables
described in Table 2 of the Appendix A. In the following section 4.4.2. The speed of innovation relates to our “time to market” (TTM)
we argue why the current operationalizing of the product and Douglas and Judge (2001) argue that innovation speed “is one of
process innovation constructs. the most important measures for assessing a firm's innovation
performance in practice”. Also, Benner and Tushman (2003:249)
4.3. Dependent construct measures believe that “…tighter coordination and repetition of activities
embedded in standardized best practices increase an organization's
There are significant gaps in research conducted on the relation- speed and efficiency.” (p. 159).
ship between ISO 9000 certification and innovation performance However, research on the impact of ISO 9000 certification on
(Subramanian and Nilakanta, 1996). An in-depth study of the product innovation, which specifically addresses the TTM dimen-
strategic innovation literature conducted by Keupp et al. (2011) sion is rather scarce. Hence, our choice of this dimension as part of
concluded that “…while there are few conceptual articles and the product innovation construct should be treated as exploratory.
qualitative case studies on innovation implementation, empirical
evidence is largely missing.” (p. 13).
The product innovation construct was developed with refer-
4.4.3. The level of innovativeness (novelty of newness of the aspect),
ence to studies conducted by Subramanian and Nilakanta (1996)
relates to our “ecological efficiency through product recyclability”
and Prajogo and Ahmed (2007). The process innovation construct
According to Kleindorfer et al. (2005) a paradigm shift is
was developed with reference to a study conducted by Douglas
required to recognize the importance of sustainable development
and Judge (2001). As mentioned in the hypotheses development
is product design. Damanpour and Gopalakrishanan (2001) argue
section, given the arbitrary selection of our dependent constructs,
that product innovations are seen as more significant because
our study should be considered as exploratory.
customers are willing to pay higher prices for ecologically efficient
products. However, there is insufficient evidence in the literature
4.4. Product innovation construct on the impact of ISO 9000 certifications on the end-of-life
recovery through new product development (Debo et al., 2005).
Prajogo and Ahmed (2007) synthesized criteria for the devel- Terziovski (2007) refers to end-of-life recovery as “ecological
opment of innovation performance constructs from previous efficiency through product recyclability.” (p. 19). Based on the above,
empirical studies of innovation (Subramanian and Nilakanta, we predict that ISO 9000 certified companies are more likely to
1996; in Prajogo and Ahmed, 2007). Further to our previous have a positive and significant impact on the design of ecologically
discussion on the justification of the hypotheses, we used three efficient products (Molina-Azorín et al., 2009).
items from the Prajogo and Ahmed (2007) criteria that we
considered to be closely aligned with the product innovation
construct. We were also guided by Subramanian and Nilakanta
4.5. Process innovation construct
(1996), who found that time-related measures were not widely
used in research studies when compared to other performance
Subramanian and Nilakanta (1996) argue that process innova-
measures, concluding that “Time-related measures are seen to
tion performance is difficult to measure since most of the
represent a promising opportunity to broaden knowledge about
measures in the literature focus on product innovation. This
performance in the context of innovation speed” (p. 5).
further reinforces our current operationalizing of the Process
Innovation construct: the degree of restructuring and the extent to
4.4.1. Being the “first” in the market relates to our “time of which ISO 9000 certification impacts on the internal customer
innovation adoption” concept. Since our study is the first to use the dependent variable
The literature on innovation adoption discussed in the hypoth- dimensions, the study should be considered as exploratory. In
eses development section is primarily focused on assessing inno- future studies, the number of dimensions in the process innova-
vation at one point in time. Naveh and Erez (2004) emphasized the tion construct should be increased so that reliability of the scales
need to consider product design in the ISO 9000 implementation could be increased (Douglas and Judge (2001); Corrigan, 1994).
202 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207

4.5.1. Restructuring were found not to be relevant to the research questions posed in
The choice of this dimension was largely dependent on this study. The second stage of data preparation was the screening
Douglas, Judge (2001) article which discusses Shea and Howell's for outliers, and checking the normality of the data. The third and
(1998) argument that an organization needs to have a two final stage of data preparation was treatment of incomplete
dimensional approach to structure: “…standardisation of TQM responses. All cells in the data set needed to be complete for
techniques and feedback loops helps an organisation control its multiple regression analysis (Hair et al., 1992). If any response had
systems and processes. Decentralisation is also necessary to allow more than six empty cells among the variables, then the entire
employees to explore and experiment with creative process improve- response was deleted from the data set. The percentage of empty
ment ideas.” (p. 159). cells was very low (o1%).
There is general agreement in the literature that ISO 9000
certification is a first step toward the creation of a TQM culture in
the organization (Evans and Lindsay, 2008). However, there is very 5. Data analysis
little research which tests the potential of ISO 9000 certification to
act as a catalyst of change. According to Naveh and Marcus (2005), 5.1. Exploratory data analysis
ISO 9000 can be used as a catalyst for change when the quality
systems certification practices are uniquely implemented in the Validity and reliability are two separate but interrelated con-
day-to-day operations (Dean and Bowen, 1994; Flynn et al., 2004). ditions (Hair et al., 1992). We need to check how accurate (valid)
are our dependent variable measures of product and process
4.5.2. Internal customer concept innovation. We also need to check how consistent (reliable) our
The internal customer concept is of interest to both ISO 9000 dependent measures are (Hair et al., 1992). As an element of
quality system certification and TQM implementation (Forker convergent validity, we consider the Cronbach's alpha for depen-
et al., 1997). We chose the TQM literature to justify the internal dent variables, innovation performance, is acceptable at an
customer concept, because there are strong links between TQM unbiased reliability coefficient 0.7.
and the ISO 9000 standard. For example, Martinez-Costa et al. We also consider the strictly parallel models (Kristof, 1963),
(2008) based on an empirical study concluded that “…if the which determine that the true item scores have the same mean
motivation for implementing ISO 9000 is internal, what the company and variance. Both, of them were rejecting at α ¼5%, with
is doing in essence was to increase TQM practices.” (p. 24). χ2 ¼ 340.906 (p-value ¼0) for the parallel model and with
Generally, research shows that the internal customer concept χ2 ¼ 620.488 (p-value ¼0). Therefore, both tests were rejected.
facilitates collaboration between various functional areas within The latter tests simply indicate that the true item scores have
organizations (Dougherty, 1992; Evans and Lindsay, 2008; Powell, different means and variances.
1995; Douglas, Judge 2001). Naveh and Marcus (2005), based on a
research study conclude that “…ISO 9000 can and should become 5.2. Structural equation model
the springboard for rethinking the way a company does business and
a point of departure for additional innovations.” (p. 5). Hypotheses As a second phase of the exploratory stage, structural equation
H1–H5 are summarized in Table 2. The constructs model is modeling was performed. Fig. 2 shows structural equation model
delineated in Fig. 1. proposed based on our literature review and the hypotheses
delineated in the paper. We first approached SEM considering
4.6. Assessment of potential non-respondent bias and common that all manifest variables to be continuous and second SEM
method bias approach was to divide the manifest variables between ordinal
and continuous as determined by the questions in the question-
A survey of non-respondents was conducted to test whether naire (Flora and Curran, 2004). Table 3 shows different fit indices
there was any response bias in the sample. Questions were asked for first and second CFA approaches using M-plus software
by telephone survey to 50 randomly selected non-respondents (Hooper et al., 2008).
from the original survey. Analysis of the results revealed that Hu and Bentler (1999) suggested that a good fit is determined
there was no significant response bias in the sample. Therefore, in when jointly the values of root mean square error of approxima-
such a large random sample, there is no reason to believe that tion (RMSEA) is 0.06 or lower and a standardized root mean
the respondents were any different to the population of plant square residual (SRMR) of 0.09 or lower. Both approaches are
managers. considered adequate to represent the latent model. The two
A frequent design problem in surveys is the common method
bias, which is detrimental to validity of the research (Podsakoff et
al., 2003). We use a Harman's test approach and perform a single-
factor exploratory factor analysis (EFA) on the dependent variables
detailed in Table 2. The result of the EFA shows that percent of
total variance explained by a single unrotated factor is 30.85%, and
a Chi-square test to determine whether a single factor was
pertinent to describe the data was rejected at α ¼5% (p ¼0.034)
(using SAS jmp software).These results indicate the common
variance is not a problem in this research.

4.7. Data preparation

Three stages of data preparation were performed prior to

conducting the main analyses. The first stage involved the selec-
tion of questions to include in the final data set. Given the diverse
nature of organizations in this study, many of the survey questions Fig. 2. Structural equation modeling.
 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207 203

Table 3 From the correlation analysis provided in Table 4, we observe

Structural equation modeling – fitting the model. that ISO 9000 certification has a significant but negative correlation
with time of innovation adoption (r¼  0.113, p¼ 0.054). Checking
Chi-square test of model fit All manifest All manifest variables
variables are are continuous the wording of the question ISO 9000 question (see Table 1), as the
continuous and ordinal level of ISO 9000 certification increases, the time of innovation
adoption takes longer. Therefore, Hypothesis H1 is rejected.
Value 8.973 9.989 With reference to Table 4, we observe that ISO 9000 certifica-
Degrees of freedom 7 7
p-Value 0.2546 0.189
tion has a significant but negative correlation with Time to Market
RMSEA (TTM), (r¼  0.210, p ¼ 0.001). Checking the wording of the ques-
Estimate 0.038 0.047 tion in the survey instrument and the direction of the Likert scale,
Probability RMSEA r 0.05 0.548 0.467 we interpret that as the level of ISO 9000 certification increases,
CFI/TLI
the time to market increases. Therefore hypothesis H2 is rejected.
CFI 0.957 0.936
TLI 0.908 0.864 ISO 9000 certification has a significant but negative correlation
SRMR (standardized root with ecological efficiency/degree of recycling (r ¼  0.154,
mean square residual) p¼ 0.009). Checking the wording of the question and the direction
Value 0.043 0.0543 of the Likert scale, we interpret that as the level of ISO 9000
certification increases, ecological efficiency/degree of recycling
increases. Therefore Hypotheses H3 is supported. These conclu-
sions are summarized in Table 4.
Table 4
Kendall's Tau-b non-parametric correlation analysis with ISO 9000.
5.3.2. Process innovation performance – hypotheses H4 and H5
Product innvotation variables Correlation We predicted that organizations are more likely to seek ISO
with 9000 certification if restructuring is part of their innovation
ISO 9000 philosophy. From Table 4 we observe a negative but significant
correlation (r ¼  0.118, p ¼0.046). Checking the wording of the
The time of innovation adoption Correlation  0.113
coefficient question and the direction of the Likert scale, as ISO certification
Sig. (2-tailed) 0.054n increases, certified companies are likely to have restructuring as
N 204 part of their innovation philosophy. Therefore, we support
Time to market (TTM) Correlation  0.21nnn hypothesis H4.
coefficient
We also predicted that if the internal customer is understood
Sig. (2-tailed) 0.001
N 200 throughout the organization, there is likelihood that ISO 9000
Ecological efficiency/degree of Correlation  0.154nnn certification would be in place. From Table 4 we observe a negative
recycling coefficient but significant relationship (r ¼ 0.156, p ¼0.009). After checking
Sig. (2-tailed) 0.009
the wording of the question and the direction of the Likert scale,
N 200
we deduce that as the level of ISO 9000 certification increases, the
Process innovation variables level of understanding of the internal customer concept increases.
Internal customer concept Correlation  0.156nnn
Therefore hypothesis H5 is supported.
coefficient
Sig. (2-tailed) 0.009
N 206 5.4. Explanatory modeling: univariate ordinal logistic regression
Restructuring Correlation  0.118nn
coefficient
analysis
Sig. (2-tailed) 0.046
N 205 The dependent variables considered in this research are ordinal
n
in nature. Ordinal logistics regression is used to create an expla-
Correlation is significant at the 0.10 level (2-tailed).
nn natory model of the influence of ISO 9000 certification. Our
Correlation is significant at the 0.05 level (2-tailed).
nnn
Correlation is significant at the 0.01 level (2-tailed). analysis is based on ordinal logistic regression analysis. Table 5
illustrates three significant dependent variable in our model,
indices were chosen in order to determine the goodness of fit of namely for internal customer concept, time to market (TTM) and
the model. The RMSEA tells us how well the model, with unknown ecological efficiency/degree of recycling at α ¼5%.
but optimally chosen parameter estimates would fit the popula-
tion's covariance matrix. The SRMR is a measure of the average 5.5. Post-estimation for the ordinal logistic regression
size of residuals between the fitted and sample covariance
matrices (Hu and Bentler, 1999). These authors suggest that a This post-estimation approach determines the probability asso-
good fit is determined when jointly the values of RMSEA is 0.06 or ciated with each category of the significant dependent variables
lower and a SRMR of 0.09 or lower. Both approaches are con- considered in the ordinal logistic regression and we compare them
sidered adequate to represent the latent model proposed in Fig. 2. with the observed category proportions, this is summarized in
Tables 6 and 7. Namely, for each significant dependent variable in
5.3. Testing of hypotheses our model, namely for Internal customer concept, Time to market
(TTM) and Ecological efficiency degree of recycling, a estimation
5.3.1. Product innovation performance – hypotheses H1, H2 and H3 approach was performed to determine the predicted probabilities
In this section we test the research hypotheses for product of each variable category using ordinal logistic regression with Stata
innovation using the Kendal Tau-b, which is a more robust 11 post-estimation procedure. In the following section we consider
correlation coefficient under a wide variety of data distribution. the two innovation performance constructs, namely product inno-
The data analysis involved the partitioning and identification of vation performance and process innovation performance.
variation in the dependent variable, product innovation perfor- In the product innovation construct, there were two dependent
mance, due to the independent variable, ISO 9000 certification. highly significant variables, namely time to market (TTM) and
204 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207

Table 5
Ordinal logistic regressions.

Hypotheses Dependent ordinal variables Link function for ordinal Is ISO 9000 certification useful to p-Value Pseudo R-square
logistic regression analysis describe the variables? α¼5% (Negelkerke) (%)

Product innovation performance

H1 The time of innovation adoption Negative log–log No 0.115 3.9
H2 Time to market (TTM) Negative log–log Yes 0.00*** 6.9
H3 Ecological efficiency/degree of recycling Probit Yes 0.01*** 6.5
Process innovation variables
H4 Restructuring Logit No 0.074* 4.4
H5 Internal customer concept Complementary log–log Yes 0.038** 5.6

n
Correlation is significant at the 0.10 level (2-tailed).
nn
Correlation is significant at the 0.05 level (2-tailed).
nnn
Correlation is significant at the 0.01 level (2-tailed).

Table 6
Post-estimation for product innovation performance.

Levels for ecological efficiency/degree Observed levels Predicted levels Time to market (TTM) Observed levels Predicted levels
of recycling model: probit probability probability Model: negative log–log of probability probability

Very low 0.209 0.217 1 year 0.497 0.502

Low 0.234 0.240 2 0.268 0.264
Satisfactory 0.370 0.357 3 0.141 0.143
High 0.126 0.130 4 0.048 0.043
Very high 0.058 0.054 5 0.043 0.046

Table 7 One possible explanation of this finding is that whilst the ISO
Post-estimation for process innovation performance. 9000 aims to standardize by focusing on assuring customers that
they will consistently receive products and services at a level of
Internal customer concept model: Observed levels Predicted levels
quality which has been agreed with the customer, the attention to
negative log–log probability probability
detail adds to the TTM. This is confirmed by Naveh and Erez (2004)
1 0.094 0.009 in their management science article, which found that “ISO 9000
2 0.109 0.112 positively affected attention to detail and negatively affected innova-
3 0.289 0.288 tion.” (p. 1576). Following from the above, ISO 9000 would tend to
4 0.402 0.399
facilitate a culture of conformance improvement rather than
5 0.189 0.189
performance improvement (Douglas et al., 1999).
A study by Yin and Shmeidler (2009) provides a much more
plausible explanation. Based on a survey of US 14001 certificate
ecological efficiency/degree of recycling as suggested by the p-values holders, the researchers found that variability in the implementa-
of Table 5. As an example, Table 6 shows the results for ecological tion of the ISO standards may explain the contradictory findings
efficiency/degree of recycling predictions of level probabilities. from the literature. With empirical support advanced by the
A comparison of observed and predicted probabilities shows the resource-based view of the firm, Yin, Shmeidler (2009) concluded
adequacy of the ordinal regression model for the data. that “…standardized management systems may be implemented
In the Process Innovation construct, there was one dependent differently in different organisations.” (p. 23).
highly significant variable, namely internal customer concept as Based on this discussion, it is reasonable to speculate that ISO
suggested by the p-values of Table 5. Table 7 shows the results for 9000 could lead to competitive change (Dimara et al., 2004). Further
ecological efficiency/degree of recycling predictions of level prob- explanation of the negative effects of ISO 9000 certification on time
abilities. A comparison of observed and predicted probabilities of innovation adoption and TTM is provided by a comprehensive
shows the adequacy of the ordinal regression model for the data. study conducted by Naveh and Marcus (2005). The researchers
concluded that where ISO 9000 certification was used as a catalyst
for change, organizations achieved a distinctive advantage through
the effective implementation process “The different level of implemen-
6. Discussion of results tation yield firm-specific operating advantages, not uniformity, as
intended by the creators of ISO 9000.” (p. 23). Lee (1998), based on a
The data analysis showed mixed results on the relationship study of Hong Kong certified firms, found that the TTM measure was
between ISO 9000 certification and product innovation performance least influenced by ISO 9000, and concluded that TTM can be
dimensions. Our prediction that companies certified to ISO 9000 achieved through new technology rather than an ISO 9000 standard
would take less time to adopt an innovation and their lead-time to (Gopalakrishan and Bierly, 2001).
market would decrease, was incorrect, therefore, H1 and H2 were Our prediction that ISO 9000 certification would increase
rejected. This leads us to the conclusion that ISO 9000 certification ecological efficiency/degree of recycling of new products was
does not appear to be suited to product innovation. Our results are correct therefore H3 is supported. This finding can be explained
consistent with Benner and Tushman (2002) and Naveh and Erez by the ongoing paradigm shift which is taking place in organiza-
(2004) research findings, which conclude that ISO 9000 certification tions around the world. End of recovery of products (ecological
had a negative effect on product innovation performance. efficiency) has accelerated since the introduction of environmental
 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207 205

accountability and the Triple Bottom Line (TBL) reporting (Larson, restructuring, and to apply the internal customer concept through-
2000). The principle of the TBL requires organizations to report on out their organization to improve cooperation and to create flatter
the usage of resources and the resulting environmental footprint structures as part of their process innovation activities (Rahman,
they create (Kleindorfer et al., 2005). In addition to the above 2000; Prakash and Gupta, 2008).
discussion, many organizations implement ISO 9000 and ISO
14000 Environmental Management Systems (EMS) certification
jointly because of the synergistic effect of sharing the documenta- 8. Implications for contemporary practice
tion Wagner (2008).
It is reasonable to speculate that improvement of ecological Given the limited empirical evidence linking ISO 9000 certifi-
efficiency may not be entirely due to ISO 9000 certification. It cation with innovation performance, the findings of this study
could be because many companies implement both systems at the have potential implications for managers, researchers and accred-
same time. Overall, our results are supported by Wagner (2008) iting bodies. Managers should exercise caution when choosing a
who concluded that an ISO 14001 certification is positively particular process to certify. ISO 9000 certification should be
associated with process innovation and weakly associated with introduced as part of a long-term continuous improvement
product innovation (Klein and Sorra, 1996). philosophy, instead of just obtaining an ISO 9000 certificate.
Our prediction that ISO 9000 certification would facilitate Managers should also be aware that the presence or absence of
restructuring of processes was correct, therefore H4 was supported. ISO 9000 certification is not a strong predictor of innovation
This is consistent with findings by Benner and Tushman (2003) that performance. Naveh and Erez (2004) argued that multiple practices
the implementation of process innovation practices provide an are required in order to improve innovation performance. Where
enabling structure that allows for more efficient horizontal coordi- ISO 9000 certification is implemented effectively, it may act as a
nation of activities. This finding can further be explained by “catalyst” for facilitating process innovation. Additional research is
research conducted by Damanpour and Gopalakrishanan (2001). required in order to examine how this could be achieved.
The authors argue that if an organization has an interest in quality Researchers should be aware that the validity of the ISO 9000
control and reengineering of their processes, they are likely to be certification process should be questioned as an indicator of
motivated to improve the efficiency of their processes (Holland and innovation performance. The purely cross-sectional data set only
Kumar, 1995). This explanation is also supported by Benner and provides an association between ISO 9000 certification and product
Tushman (2003) “…standardized best practices increase an organiza- innovation performance, which does not strictly prove that ISO
tion's speed and efficiency.” (p. 249). However, this applies to process 9000 causes product innovation performance to decrease. This may
innovation rather than product innovation, as discussed above with be caused by some third factor not measured in this study.
evidence from the literature. Auditing bodies should consider the paradox between product
Our prediction that ISO 9000 certification would have a significant innovation and process innovation in the next revision of the ISO
and positive effect on process innovation, underpinned by the internal 9000 standard. The International Standards Organisation (ISO)
customer concept was correct, therefore, Hypothesis H5 was sup- should consider promoting the ISO 9000 standard as a catalyst
ported. In order to explain why H5 was supported, we draw on the for change, and to recognize that firm-specific implementation of
earlier discussion we had on the TQM philosophy. The internal the ISO 9000 standard and may potentially lead to sustainable
customer concept is of interest to both ISO 9000 quality system competitive advantage.
certification and TQM implementation. We provided research evi- We draw further implications by addressing the paradox that
dence to demonstrate the strong link between ISO 9000 and TQM we articulated in the introduction of this paper. An abbreviated
(Han et al., 2007). Research shows that TQM and ISO 9000 practice version of the paradox can be paraphrased as follows: Whilst the
helps to break down “silos” between departments, and facilitates prime objective of the ISO 9000 standard is to reduce process
collaboration between various functional areas within organizations variation in order to reduce failure and improve quality, para-
(Evans and Lindsay, 2008; Powell, 1995; Douglas, Judge 2001). doxically, product innovations are based on learning from experi-
Our support of Hypothesis H5 is also consistent with research mentation and failure.
findings by Zuckerman and Hurwitz (1996) in Stevenson and One way to better understand the paradox is for managers to
Barnes (2001), who found that ISO 9000 certified firms improve use ISO 9000 standard for the purpose of improving performance
cooperation, resolve work procedure inconsistencies, and conflict through process innovation, rather than just conforming to a
between formal and informal communication flows, by under- standard and gaining a certificate (Marlow et al., 2010).
standing and practicing the internal customer concept. Adler (1999) sums up very well, by arguing that complex
organizations need some formalized procedures in order to assure
efficiency and quality. However, some organizations need forma-
7. Conclusions lized procedures more than others. For example, an organization
such as 3M, whose culture is based on creativity and innovation
With respect to the research question, Does ISO 9000 certifica- should be less bureaucratic and hence provide more focus on
tion stifle innovation performance? This study concludes that the product innovation, rather than process innovation through the
relationship between ISO 9000 certification is statistically insig- implementation of the ISO 9000 certification.
nificant with product innovation performance and statistically
significant with process innovation performance. Therefore, it is
reasonable to conclude that ISO 9000 certification is likely to stifle 9. Limitations of the study and future research
product innovation performance, but would likely facilitate the
improvement of process innovation performance through the Given the age of the data set there are potential limitations of
formalization of structure and the enabling of cooperation and this study. However, a consistent view has emerged from the
communication between functional areas through the application literature that the latest version of the standard, ISO 9001:2008
of the internal customer concept. has not changed the intent of its predecessor, ISO 9001:2000 and
Our findings also support the research finding from Naveh and does not introduce any significant new requirements. Therefore, it
Erez (2004) that ISO 9000 standard can act as a catalyst for change. is reasonable to claim relevance of our findings to organizations
For example, ISO 9000 certified firms are more likely to include that have been certified to the ISO 9001:2008 standard (Goult,
206 M. Terziovski, J.-L. Guerrero / Int. J. Production Economics 158 (2014) 197–207

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