The Effect of Competition, Jit and Tqm

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Journal of Economic and Social Research 10(1) 2008, 35-72

The Effect of Competition, Just In Time Production and Total Quality Management on the Use of Multiple Performance Measures: An Empirical Study

Melek Eker* & Fikri Pala"

Abstract. This paper is an empirical investigation into the use of multiple performance measures in manufacturing organizations. Specifically, the relationship between multiple performance measurement system and competition factors, JIT practices and TQM practices is examined through the data collected from 122 manufacturing firms from the Turkish top 500 companies in 2005. The results show there is a linear relationship between using multidimensional performance measurement system and the firms that have high market position are those that are using JIT and TQM more than others.

JEL Classification Codes: D29, M29. Keywords: Multiple Performance Measures, Competition, Just in Time Production (JIT), Total Quality Management (TQM), Factor Analysis, Multi-nominal logistic Regression Analysis.

1. Introduction Performance measurement is a concept of modem business administration history. The organizations in the market have to identify with concepts such as "dynamism", "scarce resources" and "complexity" and have to show high performance to survive thereby needing to measure and to evaluate their performances accurately. This means for firms that performance measurement is more than a systematic action, but today, performance measurement and evaluation system is the most important managerial tool for organizations. Nowadays, because of high specialization, division of labour and high competition, it's clear that performance should be thought more ' Department of Management, Uludag University, Bursa. " Department of Management, Uludag University, Bursa.


Melek Eker & Fikri Pala

elaborately as a concept and discussed not in a result-focused but in a process-focused way. (Albright, 2006:157-174; Yasin and et al., 2005: 323). In this context, it will be possible to state two types of criteria conteming the performance measurement in organizations. These are financial and nonfinancial performance criteria. Financial criteria evaluate the performance in terms of monetary assets gained and therefore attach importance to the result. On the other hand, a non-financial criterion evaluate the performance in terms of units or divisions and work processes in a company and highlights the actions that provide final financial result and enable its sustainability. It's possible to separate performance criteria theoretically, but both are linked practically. In fact, firms are organizations in business to make a profit, but today it is possible to argue that there are various functions in organizations and therefore financial performance is likely to be affected much more by non-financial processes. Hence, performance measurement has to have a structure containing both flnancial and non-financial criteria. (Wruck and Jensen, 1998:401^23). Due to its effect on how successful firms are, performance measurement system has to contain accurate and reliable information, which is so critical to business organizations because of its roles in future planning, evaluation of targets and actual results, and decision-making matters affecting employees are all based on the strength of the information contained in performance measurement evaluative processes. However, the more important point needing to be noted here is that generally the meaning of performance for organizations has become limited to only profitability or financial incomes. Undoubtedly, firms are profltbased organizations, but more than that, they have to be sustainable. Making profitability sustainable depends on managers' abilities to see all developments in and around firms and evaluate them according to future results. So, this underlines that the concept of performance should not be confined only to financial results, but also should have...
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