tqm practice in maquiladora_antecedents of employee satisfaction and loyalty_2006

www.elsevier.com/locate/jom

Journal of Operations Management 24 (2006) 791–812

TQM practice in maquiladora: Antecedents

of employee satisfaction and loyalty

Minjoon Jun a,*, Shaohan Cai b,1, Hojung Shin c,2

a Department of Management (MSC 3DJ), College of Business,

New Mexico State University, Las Cruces, NM 88003-8001, USAb Lakehead University, 955 Oliver Road, Thunder Bay, Ont., Canada P7B 5E1

c Department of Management and Administrative Sciences, Mendoza College of Business,

University of Notre Dame, Notre Dame, IN 46556, USA

Received 1 May 2005; received in revised form 1 September 2005; accepted 27 September 2005

Available online 22 December 2005

Abstract

In this study, we investigate the transferability of TQM practices to offshore manufacturing firms by validating direct and indirect

relationships among top management commitment, HR-focused TQM practices, employee satisfaction, and employee loyalty. Our

research objective is to isolate critical TQM practices that would enhance employee satisfaction and loyalty among maquiladora

workers. On-site surveys were conducted at two leading maquiladora firms that have long implemented TQM. The statistical results

indicate that employee empowerment, teamwork, and employee compensation have a significant and positive influence on employee

satisfaction. The improved employee satisfaction leads to a higher level of employee loyalty. In addition, the results indicate that the

effects of top management commitment on employee empowerment and teamwork are significantly mediated by employee training,

implying that the success of employee empowerment and quality teams can be dependent upon the level of employee training.

# 2005 Elsevier B.V. All rights reserved.

Keywords: Offshore manufacturing; Total quality management; Employee satisfaction; Structural equation modeling

1. Introduction

At the present time, offshore manufacturing appears

to be the most prevalent trend in the US manufacturing

sector. In 2002, 42% of the US manufacturing imports

were produced in 12 low-cost countries such as China,

India, and Mexico—see Balasubramanian and Padhi

* Corresponding author. Tel.: +1 505 646 4987;

fax: +1 505 646 1372.

E-mail addresses: [email protected] (M. Jun),

[email protected] (S. Cai), [email protected] (H. Shin).1 Tel.: +1 807 343 8525.2 Present address: Department of LSOM, Business School, Korea

University, Anam-dong, Seongbuk-gu, Seoul 136-701, Korea.

Tel.: +82 2 3290 2813.

0272-6963/$ – see front matter # 2005 Elsevier B.V. All rights reserved.

doi:10.1016/j.jom.2005.09.006

(2005) for a complete list. The proportion of man-

ufacturing imports from these countries will continue to

rise due to the intensifying global competition, which

has led US manufacturers to outsource or even move

their plants abroad (Balasubramanian and Padhi, 2005).

In today’s global economy, offshoring is not merely

synonymous with the exploitation of abundant low-cost

labor. It is instead an orchestration of new and available

pools of labor to create the firm’s new competitive

advantage (Venkatraman, 2004).

As offshore manufacturing has become a popular

alternative for multinational companies (MNCs),

management emphasis has shifted toward improving

offshore affiliates’ quality and productivity and

sustaining a low-cost advantage simultaneously (Baker

et al., 1993). In this research, we investigate the critical

mailto:[email protected]



http://dx.doi.org/10.1016/j.jom.2005.09.006

M. Jun et al. / Journal of Operations Management 24 (2006) 791–812792

challenges encountered by MNCs while transferring the

established management programs into their offshore

affiliates in an effort to improve the affiliates’

operational performance. In particular, our research is

aimed at total quality management (TQM) practices in

Mexican maquiladora industry, one of the most popular

offshore manufacturing bases in the world.

1.1. Research motivation

Institutional theory, an important domain of orga-

nizational behavior research, provides an insight into

why firms benchmark other institutions’ managerial

practices. To be more adaptive to environmental

uncertainty and complexity, organizations tend to

imitate the structure, norms, rules, and practices of a

dominant institution, resulting in organizational iso-

morphism—‘‘the resemblance of a focal organization to

other organizations in its environment (Deephouse,

1996).’’ Therefore, firms that share common norms and

practices will become similar over time.

TQM proponents have long embraced the idea of

institutional theory and have emphasized the isomorphic

nature of TQM. That is, TQM contains a universal set of

management practices and principles that can transcend

organizational and national boundaries (Mitki and Shani,

1995). Accordingly, organizations that properly imple-

ment TQM would gain similar benefits regardless of their

industry type and nationality (Dahlgaard et al., 1998;

Dawson, 1994; Flynn et al., 1995; Mitki and Shani, 1995;

Yavas, 1995). However, TQM implementation in

Mexican maquiladoras has not been as successful as

advocates of TQM predict. Both anecdotal and empirical

evidence indicates that a great number of maquiladoras

have suffered from quality failures and low productivity

in spite of the companies’ persistent efforts to implement

TQM and lean operations (Jun et al., 2004; Knotts and

Tomlin, 1994; Lawrence and Lewis, 1993; Lawrence and

Yeh, 1994; McDermott, 1994).

Various explanations, such as cultural differences

(Lawrence and Yeh, 1994) and government red tape

(Fullerton, 2003), have been offered to explain the lack of

TQM efficacy in maquiladoras. A majority of the studies

agree that quality failures of maquiladoras are mainly

attributed to epidemic human resource (HR) problems

epitomized by an extremely high rate of employee

absenteeism and turnover (e.g., Knotts and Tomlin, 1994;

McDermott, 1994). For instance, many maquiladora

workers fail to return to work after vacation because of

their family issues (Teagarden et al., 1992). Maquiladora

workers in general are not loyal to their companies and

often switch jobs even for a minimal increase in salary

(Lawrence and Lewis, 1993). This shortcoming of the

cross-cultural transferability of TQM has prompted

scholars to question the universality of TQM, particularly

in the context of Mexican maquiladoras (Jun et al., 2004).

Here, we can raise a set of important research

questions as follows:

� I
f many of the quality and productivity failures at the
maquiladoras are driven by the absence of a loyal and

stable workforce, can management take certain

initiatives to enhance maquiladora employees’ satis-

faction and loyalty, and in turn alleviate HR problems

while improving its TQM implementation efforts?

� I
f so, on which attributes of TQM should the
management place its emphasis? In other words,

what TQM-oriented HRM practices are specifically

linked to maquiladora workers’ satisfaction and

loyalty to their firms?

Overall, the existing TQM literature does not address

these important issues adequately for two reasons. First,

most of the studies have been centered on the manage-

ment perspective with an objective of identifying key

TQM practices that significantly contribute to organiza-

tional performance improvement. Consequently, there

has been little attention paid to employee perceptions of

(or satisfaction with) TQM programs, even though

strategic management of human resources is equally

important in optimizing TQM performance (Ahmad and

Schroeder, 2003). Second, the conventional TQM

framework has been built upon surveys of firms in the

developed nations, and its applicability and generality

could be limited to those countries. Thus, the existing

literature may not enlighten the offshore management

about specific TQM practices, which can help improve

local workers’ satisfaction and loyalty.

Understanding the two major limitations in the

literature, the primary objective of this study is to

develop an empirical model for establishing associa-

tions among top management commitment, human

resource-focused TQM practices (HR-focused TQM

practices hereafter), employee satisfaction, and

employee loyalty. In particular, we are interested in

the isolation of anteceding TQM practices that would

positively impact maquiladora employees’ satisfaction.

The underlying premise is that maquiladora employees’

loyalty is likely to be influenced by the level of their job

satisfaction, and thus maintaining a loyal workforce is a

prerequisite for a successful TQM implementation.

Note that this research is neither intended to explain

why the HR-originated quality failures are more

conspicuous in Mexican maquiladoras, nor designed

M. Jun et al. / Journal of Operations Management 24 (2006) 791–812 793

to compare quality performance levels of typical

maquiladora firms. Rather, we specifically investigate

the perceptions of employees at two leading maquila-

dora firms which have successfully implemented TQM

for decades and whose practice may shed light on how

TQM should be implemented in the maquiladora

industry. Hopefully, the outcome of this research can

be used as a guideline for the rest of the MNCs that have

encountered serious quality problems in their offshore

affiliates. In addition, our findings may provide some

empirical insights into the ongoing debates over the

validity of the ‘‘universality of TQM’’ as a theory.

1.2. The Mexican maquiladora

Maquiladoras are commonly defined as Mexican

factories that are located in areas close to the US border

and that possess special privileges from the Mexican

government to produce goods primarily for the US

market. The maquiladora industry is a vital element of

the Mexican economy and the business of MNCs in

Mexico as well. During the past two decades, many

MNCs moved their labor-intensive production plants to

Mexico to capitalize on low-cost production, and 79%

of ownership of the maquiladora industry was in the

hands of US companies in 2004 (Canas et al., 2004).

The past success of the maquiladora industry can be

accredited to its geographical proximity to major

markets (mainly the US and Canada) and an abundance

of low-cost workers, which together make Mexico an

attractive location for offshore manufacturing. The

maquiladora industry has become Mexico’s main

source of foreign exchange and represents about 55%

of the country’s manufacturing exports and 9% of

Mexico’s formal employment (Canas et al., 2004).

Currently, however, the Mexican maquiladoras are

forced to choose between meeting industry quality and

productivity standards and losing business to suppliers

from other low-cost countries. The amount of foreign

direct investment (FDI) in maquiladoras slowed down

in the 2000s while it escalated in the Chinese

manufacturing sector. The number of maquiladora

plants also started decreasing as China gained its

competitive edge in low-value-added, commoditized

sectors, such as apparel, toys, and footwear (Fullerton,

2003). Under these circumstances, there exists a

growing concern in both Mexican government and

maquiladora companies that they must compete

effectively by improving quality and productivity rather

than depending on low price.

This paper is organized in the following manner. In

Section 2, we provide the theoretical background of this

research, the conceptual foundation of the empirical

model, and the corresponding research hypotheses based

on an extensive review of the relevant literature. The

detailed research methodology is explained in Section 3,

followed by the results of statistical analysis in Section 4.

The discussion and implications of the research findings

are summarized in Section 5. Finally, Section 6 of the

paper concludes with a discussion on research contribu-

tion, limitations, and the direction of future research.

2. The literature and research hypothesis

2.1. Institutional theory and TQM universality

Organizational behavior theorists have acknowl-

edged that when an organization becomes institutiona-

lized through a series of adaptive processes, the

organization takes on a distinctive life of its own apart

from the influence of individual members (Selznick,

1996). This conventional view of institutional theory

has evolved into a relatively new institutionalism –

often called isomorphism – that in order to gain

legitimacy and support organizations tend to model

themselves after similar and dominant organizations’

established structure, norms, and rules (Selznick, 1996;

Staw and Epstein, 2000; St. John et al., 2001). In this

context, the implementation of popular management

programs should be understood as an adaptive process

to improve organizational legitimacy and performance

(Staw and Epstein, 2000).

TQM is one of the popular management programs

investigated as an indicator of organizational isomorph-

ism. For example, Westphal et al. (1997) show that the

use of trendy TQM procedures has led to an increase in

the organizational legitimacy of hospitals in the US. Staw

and Epstein (2000) also find that the implementation of

popular management techniques such as TQM con-

tributes to the reputation and legitimacy of the firms. In

other words, companies are viewed as more innovative

and rated as having higher quality when they have

implemented isomorphic TQM practices. Similarly, St.

John et al. (2001) argue that the widespread adoption of

TQM and JIT has led the firms within an industry to share

similar values, processes, and standards.

In many aspects, the ‘‘universality of TQM’’

perspective mirrors the primary thesis of institutional

theory in the organizational behavior literature. Propo-

nents of TQM argue that the widespread adoption of

TQM, fueled by same industry benchmarking and the

institutionalization of numerous quality awards, could be

regarded as evidence of the validity of institutional theory

(Rungtusanatham et al., 2005; St. John et al., 2001). Thus,


organizations implementing TQM are perceived as

managing their operations in a similar fashion and

commonly benefit from the implementation of TQM.

Recently, however, the lack of homogenous success

with TQM among firms has led researchers to cast doubt

on the universal applicability of TQM. Some research-

ers believe that a firm’s success with TQM is contingent

upon the fit among the firm’s structure, strategy, and

environmental conditions. (Ahire and Dreyfus, 2000;

Das et al., 2000; Huq and Stolen, 1998; Robert et al.,

2000; Sitkin et al., 1994; Sousa and Voss, 2001; Yeung

et al., 2003; Zhao et al., 2004). In fact, whether the TQM

framework is universal or contingent still remains a

controversial issue (Rungtusanatham et al., 2005; Sousa

and Voss, 2001).

Theoretically, the present study is consistent with

Rungtusanatham et al. (2005) institutional and com-

prehensive view of TQM–TQM implementation across

countries may follow analogous patterns, but the weight

given to each of the TQM practices must be adjusted in

order to lower TQM barriers inherent in different

environments. From this theoretical standpoint, this

research is framed in two stages. First, we identify

universal attributes of HR-focused TQM practices in the

existing literature. Then, by analyzing data, we attempt

to isolate a specific set of TQM practices (antecedents)

that significantly affect maquiladora employees’ satis-

faction and loyalty.

2.2. Key attributes of human resource-focused TQM

Since employee satisfaction and loyalty are the major

domains of this research, we limit the scope of TQM to

HR-focused TQM practices. HR-focused TQM practices

are an essential TQM-enabler which helps employees to

develop and utilize their full potential to accomplish the

company’s business objectives and execute the corre-

sponding action plans (Baldrige National Quality

Program, 2005; Dean and Bowen, 1994).

The key attributes of TQM uncovered by five

seminal studies are summarized in Table 1. As can be

seen in Table 1, researchers agree that the leadership

and commitment of top management is the driver of

TQM. There is also a commonality among these five

studies with respect to what constitutes TQM. Flynn

et al. (1995) identified eight dimensions of TQM

practices and classified them into two broad categories:

infrastructure practices (top management support,

customer relationship, supplier relationship, workforce

management, and work attitudes) and core practices

(product design process, process flow management, and

statistical control and feedback). In this framework,

HR-related TQM practices are categorized as infra-

structure practices which ‘‘comprise the environment

that supports effective use of the core quality manage-

ment practices’’ (Flynn et al., 1995, p. 660). Similarly,

Ahire et al. (1996) developed and validated twelve key

attributes of TQM, in which employee training,

employee empowerment, and employee involvement

were classified as HR-focused TQM practices.

Despite minor differences, the TQM studies in

Table 1 identify HR-focused TQM practices as

employee training, teamwork, employee empowerment,

performance appraisal, and employee compensation.

We incorporate these five TQM practices as the main

research variables. These TQM variables are also

consistent with ‘‘Category 5. Human Resource Focus’’

of Baldrige National Quality Award Criteria (2005),

which emphasizes the importance of employees’

performance management, education and training,

and well-being and satisfaction.

2.3. The conceptual model building and research

hypothesis

The hypothesized conceptual model is provided in

Fig. 1. As shown in Fig. 1, the conceptual model typifies

the traditional framework of TQM, in which top

management commitment is the key driver (exogenous

variable), HR-focused TQM practices and employee

satisfaction as intermediate endogenous variables, and

employee loyalty as an endogenous variable. Although

the causal associations among the constructs shown in

Fig. 1 seem to be straightforward, to our knowledge the

present study is the only one that holistically

investigates the relationships among HR-focused

TQM practices, employee satisfaction, and employee

loyalty. Most of the literature cited in the paper

examined individual construct relations, such as the

relationship between empowerment and satisfaction

(e.g., Koberg et al., 1999; Laschinger et al., 2001;

Seibert et al., 2004; Spreitzer et al., 1997).

2.3.1. Top management commitment and HR-

focused TQM practice

Since the inception of the TQM movement, quality

leadership by top management has been supported by

many researchers (Anderson et al., 1995; Choi and

Behling, 1997; Flynn and Saladin, 2001; Kaynak,

2003). To achieve total quality, top managers must

clarify quality goals, treat quality as a strategic issue, set

quality as a priority, allocate adequate resources to

quality improvement efforts, and evaluate employees

based on their quality performance (Ahire et al., 1996).

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Table 1

Comparison of TQM practices identified by the major studies and the present study

Saraph et al. (1989) Anderson et al. (1995) Flynn et al. (1995) Ahire et al. (1996) Black and Porter (1996) Present Study

Key driver Top management

leadership

Visionary leadership Top management

support

Top management

commitment

Corporate quality culture Top management

commitment

Role of quality

department

Strategic quality

management

Dependent variable Quality performance Customer satisfaction Competitive advantage Product quality Improvement of

quality systems

Employee

satisfaction

and loyalty

Customer satisfaction

Human resource-

focused TQM

Employee relations Learning Workforce management Employee training Teamwork structures

for improvement

Employee

empowerment

Training Employee fulfillment Work attitudes Employee

empowerment

External interface

management

Employee training

Internal and external

cooperation

Employee

involvement

People and customer

management

Teamwork

Appraisal system

Employee

compensation

Others Process management Process management Process flow

management

Statistical

process control

Supplier partnerships

Product and

service design

Continuous improvement Statistical control/

feedback

Design quality

management

Operational quality planning

Supplier quality

management

Product design process Supplier quality

management

Quality improvement

measurement systems

Quality data reporting Supplier relationship Product and

internal quality

Communication of

improvement information

Customer relationship Benchmarking Customer satisfaction orientation

Customer focus


Fig. 1. Schematic illustration of the conceptual model.

Top management commitment may be even more

important in maquiladora companies. Mexican culture

can be characterized as a ‘‘top-down hierarchical

structure,’’ in which the employees tend to rely on

top managers to make decisions (Tiessen, 1995).

Furthermore, in most Mexican companies, the endorse-

ment of top managers is critical in convincing

employees of their active roles in TQM (Nicholls

et al., 1999). The lack of top management support is a

critical reason that many maquiladoras and other

Mexican companies have failed in implementing

TQM (Lawrence and Yeh, 1994; Nicholls et al.,

1999). In this context, we propose to test the following

group of hypotheses relating to the relationships

between top management commitment and the five

HR-focused TQM practices identified:

H1a. Top management commitment has a positive

impact on the level of employee empowerment in

maquiladora companies.

H1b. Top management commitment has a positive

impact on the level of employee training in maquiladora

companies.

H1c. Top management commitment has a positive

impact on teamwork in maquiladora companies.

H1d. Top management commitment has a positive

impact on the performance appraisal systems in maqui-

ladora companies.

H1e. Top management commitment has a positive

impact on the employee compensation systems in


2.3.2. HR-focused TQM practices and employee

satisfaction

Although employee satisfaction has not received

much attention in the field of operations management

(OM), it has been continually studied as a domain of

HRM research. Accordingly, the theoretical justifica-

tion for our hypotheses is mostly rooted in the HRM

literature.

Employee empowerment aims to generate improved

individual and organizational performance and to help

employees reach certain personal goals by authorizing

employees to participate in the decision-making

process, inspect their own jobs, and find and fix

problems (Ahire et al., 1996; Seibert et al., 2004). A

number of HRM studies, mostly conducted in the US

and other developed countries, have commonly found

that the empowerment programs provide employees

with a positive job experience, a clear sense of

contribution, and autonomy in initiating and regulating

actions, thereby leading to better employee satisfaction

(Koberg et al., 1999; Laschinger et al., 2001; Spreitzer

et al., 1997; Seibert et al., 2004).

Employee empowerment in the offshore manufac-

turing environment has not been studied extensively,


and two prior studies (Harrison and Hubbard, 1998;

Robert et al., 2000) provide mixed results. For example, in

a comparative study of empowerment in the US, Mexico,

Poland, and India, Robert et al. (2000) found that

employee empowerment has no significant association

with Mexican employees’ work-related satisfaction but

has a significant and positive influence on the employees’

organizational commitment. More interestingly, empow-

erment in India was negatively correlated with work

satisfaction. In this context, whether employee empow-

erment programs would have a positive influence on

maquiladora workers’ satisfaction is a net empirical que-

stion, and we propose to test the following hypothesis:

H2. Employee empowerment has a positive impact on

employee satisfaction in maquiladora companies.

Employee training provides opportunities in which

the employees can broaden their knowledge and skills

for more efficient teamwork and achieve individual

growth and development. For example, Marie (1995)

and Saks (1996) observe that workers who received

self-regulatory training report higher levels of job

satisfaction than those without such training. Later,

Martensen and Gronholdt (2001) surveyed employees

in Danish organizations and found that the development

of competencies through various training programs has

a positive impact on employee satisfaction.

Employee satisfaction associated with training stems

from the fact that employees gain confidence of

producing high quality, perceive potential for career

advancement, and appreciate their companies’ invest-

ment in them (Burke, 1995; Saks, 1996). Likewise,

many maquiladora workers consider training an

important benefit because these workers are generally

not well-educated (Teagarden et al., 1992). It is our

conjecture that the workers are likely to be satisfied if

they receive effective TQM training. Hence, we propose

to test the following hypothesis:

H3. TQM-oriented training has a positive impact on

employee satisfaction in maquiladora companies.

Teamwork in TQM often takes forms of quality

circles, quality improvement teams, and cross-functional

teams. Effective teamwork can motivate employees and

improve employee performance and self-efficacy. This

improved motivation and self-efficacy via teamwork can

be a source of employee autonomy, meaningfulness,

bonding with team members, and satisfaction (Denison

and Hart, 1996; Kirkman and Rosen, 1999; Mitchell

et al., 2001; Wall et al., 1986; Rahman and Bullock,

2005). For example, Rahman and Bullock (2005) find

from their surveys of manufacturing companies in

Australia and New Zealand that the use of teams has a

significantly positive relationship with employee morale.

We expect the same positive relationship between

effective teamwork and employee satisfaction in the

Mexican maquiladoras. Although some researchers

argue that teamwork is not congruent with the Mexican

culture (Adler, 1999; Lawrence and Yeh, 1994), an

empirical study conducted by Pavett and Whitney

(1998) reveals that Mexican employees generally

express favorable attitude toward teamwork. Therefore,

we propose to test the following hypothesis:

H4. Teamwork has a positive impact on employee

satisfaction in maquiladora companies.

The effect of performance appraisal systems on

employee satisfaction (or dissatisfaction) has been

extensively documented in the HRM literature (e.g.,

Boswell and Boudreau, 2000; Pettijohn et al., 2001). In

the TQM literature, Tatikonda and Tatikonda (1996)

argue that TQM-oriented performance appraisal systems

need to focus on the development of knowledge or skills

possessed by individual employees, which is likely to

increase employee motivation. A case study conducted

by Cowling and Newman (1995) also indicates that

TQM-oriented appraisal systems offer personal recogni-

tion and may improve employee satisfaction.

In the case of maquiladora companies, there is

marginal evidence that employee satisfaction may be

associated with appraisal systems. For example,

Teagarden et al. (1992) reveal that maquiladora

employees are dissatisfied with traditional performance

appraisals adopted by their companies. Teagarden et al.

(1992) suggest that these companies’ performance

appraisal systems need to be altered to focus on the

development needs of their employees. Indeed, the

association between appraisal systems and employee

satisfaction has not been studied extensively for the

maquiladora industry. However, it can be generally

inferred from the existing TQM studies that TQM-

oriented appraisal systems with an emphasis on

employee development are likely to increase employee

satisfaction in maquiladora companies. Thus, we

propose to test the following hypothesis:

H5. TQM-oriented performance appraisal systems

have a positive impact on employee satisfaction in


Employee compensation systems are most frequently

considered as one of the key factors influencing

employee satisfaction (Britton et al., 1999; Carson

et al., 1999; Karl and Sutton, 1998; Wageman, 1995;

Welbourne and Cable, 1995). These systems often


consist of financial and non-financial rewards for

individuals and teams who contribute to TQM efforts

(Blackburn and Rosen, 1993).

In the maquiladora industry, employee compensation

is also crucial in determining employee satisfaction. For

example, Farquharson (1992) argues that the wage

difference between US and Mexican workers is a major

source of discontent among maquiladora workers.

Teagarden et al. (1992) report that rewards and benefits

are related to maquiladora workers’ perceptions of

employers as patrons. As for the TQM-oriented

compensation, its emphasis on team performance

appears to be consistent with the collectivistic

characteristic of the Mexican culture. Therefore, we

propose to test the following hypothesis:

H6. TQM-oriented compensation systems have a posi-

tive impact on employee satisfaction in maquiladora

companies.

2.3.3. Employee satisfaction and loyalty

Numerous HRM studies conducted in the US

indicate that employee satisfaction is positively

related to employees’ loyalty to their companies

and negatively related to their intention to turnover

(Brown and Peterson, 1993; Griffeth et al., 2000; Hom

and Kinicki, 2001; Martensen and Gronholdt, 2001).

A lower level of intention to leave among satisfied

employees is driven by the fact that satisfied

employees are more likely to perceive greater benefits

in staying in their organizations, compared with

dissatisfied employees. Therefore, satisfied employees

tend to show a higher level of loyalty and commitment

to their companies and are unlikely to leave their jobs

(Guimaraes, 1997).

In the maquiladora studies, Harrison and Hubbard

(1998) find that Mexican employees’ job satisfaction is

significantly associated with their commitment to the

firm. Similarly, Borycki et al. (1998) and Robert et al.

(2000) show that job satisfaction is the most important

determinant of Mexican employees’ commitment to

their organizations. Therefore, we propose to test the

following hypothesis:

H7. Maquiladora employees’ job satisfaction has a

positive impact on the employees’ loyalty to the maqui-

ladora companies.

2.3.4. Training as a mediator between top

management commitment and TQM variables

Given that the constructs associated with HR-

focused TQM practices are implemented simulta-

neously, it is likely that some of them would be

somewhat correlated. The possible correlations among

the constructs of TQM practices may alter the influence

of the constructs on employee satisfaction. In particular,

the relationships between training and employee

empowerment and between training and teamwork

seem to be relatively well-established in the literature.

For example, empowerment programs require employ-

ees to participate in the decision-making process,

inspect their own jobs, and find and fix the operational

problems voluntarily (Ahire et al., 1996; Seibert et al.,

2004). In addition, working as a team often requires

employees to confront problems and resolve conflicts

within themselves. Once equipped with the proper

knowledge through training, teams are able to manage

conflicts better and work more productively through

problem solving (Howard and Thomas, 1993). There-

fore, we surmise that the positive impact of the

commitment of top management on employee empow-

erment and teamwork can be mediated by the degree of

employee training.

In maquiladoras, most entry-level workers come from

an agrarian background, where the social infrastructure

does not emphasize industrial work patterns, such as

punctuality, regular attendance, and teamwork (Teagar-

den et al., 1992). Thus, adequate training is required to

educate employees about the skills required for employee

empowerment and teamwork (Nicholls et al., 1999). In

this context, it can be supposed that employee training

could have a certain influence on the effectiveness of

employee empowerment. Therefore, we propose to test

the following hypotheses:

H8. Employee training in TQM has a positive impact

on the level of employee empowerment in maquiladora

companies.

H9. Employee training in TQM has a positive impact

on teamwork in maquiladora companies.

2.4. Formal representation of the conceptual model

The research hypotheses can be integrated to form a

set of structural equations. Since the mediation effect of

training on other TQM factors was not clearly tested in

the literature, we created two competing structural

models from the conceptual model illustrated in Fig. 1.

One (Model A) is without the mediation effect of

employee training on employee empowerment and

teamwork (i.e., without the paths defined by H8 and H9

in Fig. 1). The other (Model B) is with the mediation

effect of employee training. The Model A can be

represented by Eqs. (1)–(7). The following abbrevia-

tions are used for simplicity: top management


commitment (TM), employee empowerment (EE),

employee training (ET), teamwork (TW), appraisal

systems (AS), employee compensation (EC), employee

satisfaction (ES), and employee loyalty (EL).

EE ¼ g1ðTMÞ þ z1 (1)

ET ¼ g2ðTMÞ þ z2 (2)

TW ¼ g3ðTMÞ þ z3 (3)

AS ¼ g4ðTMÞ þ z4 (4)

EC ¼ g5ðTMÞ þ z5 (5)

ES ¼ b61ðEEÞ þ b62ðETÞ þ b63ðTWÞ þ b64ðASÞ

þ b65ðECÞ þ z6 (6)

EL ¼ b7ðESÞ þ z7 (7)

In Model B, the mediation effects of employee

training (specified by H8 and H9) are included as shown

in Fig. 1. Thus, in Model B, Eqs. (1) and (3) should be

modified into the following Eqs. (8) and (9),

respectively:

EE ¼ g1ðTMÞ þ b1ðETÞ þ z1 (8)

TW ¼ g3ðTMÞ þ b3ðETÞ þ z3 (9)

These alternative structural Models A and B will be

tested independently and their results will be compared

and contrasted in Section 4.

3. Methodology

3.1. Content validity of the survey instrument and

translation into Spanish

A survey’s content is valid when the items in the

survey adequately cover the domain of research. In

other words, content validity must be determined by

verifying whether the empirical indicators are measur-

ing what they intend to measure (Nunnally, 1978). For

the content validity of the survey instruments, we

conducted an extensive review of the TQM and HRM

literature and initially adopted many of the scales

validated in the literature (Ahire et al., 1996; Lawrence

and Yeh, 1994; Pavett and Whitney, 1998; Tamimi and

Sebastianelli, 1998). These pilot scales were reviewed

by three maquiladora managers, who had been involved

in implementing TQM initiatives in their plants, and

four academicians, whose expertise is in TQM, HRM,

and cross-cultural management. Several revisions were

made based on the experts’ feedback.

A Mexican scholar translated the final version of the

questionnaire into Spanish. Another researcher, who is

fluent in both Spanish and English, translated the

Spanish version back into English to scrutinize the

consistency between the English and Spanish versions.

Then, two scholars who are Spanish–English bilingual

examined both the Spanish and the English versions

independently and validated that the translation was

accurate and consistent. This revised questionnaire was

pre-tested by 56 maquiladora workers, and the scale

items were further refined based upon the workers’

comments and suggestions.

A brief version of the survey instruments is provided

in Appendix A. As shown in Appendix A, the

questionnaire consists of 31 items. Among the 31

items, 20 items are designed to measure the key

constructs for TQM practices (employee training,

teamwork, employee empowerment, performance

appraisal, and employee compensation), 8 items are

designed for measuring employee satisfaction and

loyalty, and 3 items are designed for measuring top

management commitment to TQM. In this survey, each

survey respondent was asked to provide a personal

profile, such as gender and education level, and to rate

one’s perception of and experience with TQM practices

on a five-point Likert scale.

3.2. Company selection and data collection

Depending on research objectives, a variety of

methods can be used to collect data on TQM and

employee satisfaction and loyalty. A dominant form of

data collection method adopted in OM is the cross-

sectional survey approach, in which questionnaires are

mailed to one or more respondents of the sample

companies (Ketokivi and Schroeder, 2004; Rungtusa-

natham et al., 2005). Although the conventional mail-

survey approach is useful in minimizing sampling bias

and industry-specific bias, there are two potential risks

with this approach in studying the maquiladora industry.

First, it is well-recognized among the researchers that

the empirical surveys of the maquiladora firms suffer

from extremely low-response rates (Dowlatshahi,

1998). For example, a study conducted by Franco

and von Bertarab (1997) on purchasing negotiations of

maquiladoras resulted in only a 5% response rate.

Second, TQM has not yet become an industry-

wide practice among the maquiladoras in Mexico


(Dowlatshahi, 1998). Thus, it is likely that reliability

and quality of response may vary considerably from

company to company.

Note that in the present study, we attempt to identify

a group of factors that would lead to a successful TQM

implementation in the offshore manufacturing environ-

ment. Accordingly, it is crucial to collect data from the

companies which have long implemented TQM and

have achieved a reasonable success with the program.

Therefore, we decided to contact the leading maqui-

ladora firms in TQM and conduct on-site surveys.

A total of sixteen maquiladora companies were

identified and contacted through the Asociacion de

Maquiladoras, AC (AMAC) in Mexico. These compa-

nies’ TQM success stories have been recognized by

AMAC and reported by practitioners’ articles. Two

companies actually agreed to participate in the survey.

The two firms have practiced TQM for decades, defying

Table 2

Profiles of the survey respondents

Profile Number of responden

Gender 407

Age 396

Education 396

Experience with current type of job

(including other companies)

395

Employment period at the current company 397

Type of work 396

the common stereotype against the maquiladora

industry that a successful TQM implementation is

extremely challenging due to HR problems. It is

noteworthy that both firms have maintained an annual

employee turnover rate of less than 1%, which is far

below the industry average. Non-public data from

AMAC reveal that the industry average of annual

turnover rate is 4.39% with a range from 0.42 to 16.1%

in 2004.

The first maquiladora (Maquiladora A hereafter) is a

subsidiary of a firm in the US that is one of the world’s

leading companies in mobile electronics, transportation

components, and systems technology. Maquiladora A

has a workforce size of about 2200 regular employees

and primarily manufactures electrical harnesses and

electrical fuse boxes for various vehicles. The second

maquiladora (Maquiladora B hereafter) is a joint

venture between US and Japanese firms. The US parent

ts Category Count Proportion (%)

Male 158 38.8

Female 249 61.2

20 or less 63 15.9

21–25 102 25.8

26–30 100 25.3

31–35 64 16.2

36–40 32 8.1

41–50 26 6.6

50 or more 9 2.3

<Elementary 15 3.8

Elementary 106 26.8

Middle school 119 30.1

Technical school 44 11.1

High school 44 11.1

Some college 26 6.6

College 42 10.6

Less than 1 year 71 18.0

1–3 years 119 30.1

3–5 years 88 22.3

5–7 years 49 12.4

7 or more years 68 17.2

Less than 6 months 64 16.1

6–12 months 28 7.1

1–2 years 81 20.4

2–4 years 91 22.9

4 or more years 133 33.5

Quality control 52 13.1

Production 218 55.1

Administration 33 8.3

Engineering 23 5.8

Others 70 17.7


company is one of the world’s largest automotive

suppliers, focusing on automotive interior systems such

as seats, instrument panels and cockpits, floor and

acoustic systems, and electronic and electrical products.

The Japanese parent company is a leading manufacturer

of electric wire and cable, non-ferrous metals, and other

related products. Maquiladora B has approximately

5000 regular employees and mainly produces electrical

harnesses, seats, and interior control panels for various

vehicles.

Through the assistance of plant managers, a random

sample of employees was selected by utilizing a

stratified sampling approach in both companies. In this

sampling technique, the target population is classified

into mutually exclusive subgroups (or strata), and

respondents are selected randomly from each sample

group. We utilized the stratified sampling approach in

order to achieve heterogeneity among respondents to

reduce the common survey bias. This was an important

step to sustain the reliability of the research, since all the

survey respondents are sampled from two companies.

The subgrouping criteria (strata) used in the present

study are work departments (see the detailed categories

summarized in Table 2) and the employment period at

the current company. These two criteria were chosen

because individual employees’ experience with and

training for the TQM program can vary, depending on

respondents’ job characteristics and their employment

period at the current company.

The survey was conducted during the normal

working hours, and the lead author and two Spanish-

speaking research assistants were present for the survey

to answer questions from the employees. Five hundred

questionnaires were proportionally distributed to each

subgroup of employees in two maquiladoras (150

employees in Maquiladora A; 350 in Maquiladora B),

from which we collected 463 questionnaires. Among

the collected surveys, 56 responses were incomplete in

most items, and thus discarded. A total of 407 usable

questionnaires were included in the study (110 from

Maquiladora A; 297 from Maquiladora B), resulting in

an 81.4% response rate.

Table 2 summarizes the demographics of the

respondents and shows that their background is well-

diversified, as was intended in the stratified sampling

procedure. For example, regarding the type of jobs

performed by respondents, 55% were working for the

production department; 13% for quality control; 8% for

administration; 6% for engineering; and 18% for others.

Table 2 also shows that the employees’ work experience

with specific tasks (from less than a year to 7 or more

years) and employment period at the current company

(from less than 6 months to 4 or more years) are also

diversified in our sample group.

These employees have received a variety of regular

and informal training offered by the sample firms as their

tenure extends over time. A common concern of both

management groups is a low-education level of the

Mexican employees—61% of the employees in our

sample have a final education level of middle school or

lower, as shown in Table 2. Therefore, implementation of

TQM requires careful customization of training, depend-

ing on the employee’s task, job experience, and education

level. Although basic orientation and on-the-job training

are the primary training methods, both maquiladoras

offer advanced training programs, including teamwork

orientation, problem-solving skills, and basics of

statistical process control. In addition to these programs

designed to support employees’ self-sufficiency for

specific tasks, both maquiladoras offer training programs

to secure employee safety on the shop floor.

3.3. Statistical modeling method

Structural equation modeling is chosen as the

primary research vehicle. Structural equation models

decompose the empirical correlation or covariance

among the scale items (indicators) to estimate the path

coefficients among the latent constructs. Thus, a reliable

causal model should consist of statistically reliable

measurement and structural models. In this context, we

strictly follow the two-step approach suggested by

Bollen (1989), in which construct reliability must be

assured to create a sound measurement model and the

statistical significance of path coefficients are verified

by ‘‘fit’’ between the sample covariance and the

reproduced covariance from the causal model. With

the use of the two-step approach, researchers can secure

the reliability of indicators, pinpoint model misspeci-

fication, and avoid the interaction of measurement and

structural models, which could result in interpretational

confusion (Anderson and Gerbing, 1988; Hair et al.,

1998; Hulland et al., 1996).

4. Statistical analysis and results

Before conducting the main analysis, we examined

the descriptive, univariate, and multivariate statistics of

the variables and detected no apparent outlier. The

skewness and kurtosis of all variables appeared to

satisfy the prerequisite of normality for testing a

structural equation model. The sample size of the

present study (n = 407) also meets the minimum

requirement that 200 or more cases are desirable to


test a complex structural equation model (Hulland et al.,

1996). When a returned survey contains a diminutive

portion of unanswered items, the mean substitution

procedure was used to treat the missing values as

suggested by Peters and Enders (2002). Treatment of

missing values increases the precision of parameter

estimates by lowering sampling variability and

decreases the overall bias in parameter estimates

(Peters and Enders, 2002).

4.1. Convergent validity of the measurement model

Since we use multi-item scales to represent each

latent construct, it is necessary to evaluate the validity of

all of the constructs. Convergent validity of a construct

can be determined by construct reliability. A construct

with convergent validity consists of highly reliable

scales that are strongly inter-correlated, indicating that

they are measuring the same latent concept (Hair et al.,

1998; Kerlinger, 1992). The reliability statistics of the

measurement model are summarized in Table 3.

First, we tested the preliminary measurement model,

using a confirmatory factor analysis of the scales listed

in Appendix A. The result indicated that ten items were

not properly loaded in the measurement model due to

Table 3

The measurement model statistics

Construct Indicator Standardized

loading

Top management commitment TM1 0.666

TM2 0.887

TM3 0.776

Employee empowerment EE2 0.749

EE4 0.770

Employee training ET1 0.687

ET2 0.663

ET3 0.789

Teamwork TW1 0.661

TW2 0.645

Appraisal systems AS1 0.656

AS3 0.822

Employee compensation EC1 0.877

EC2 0.784

Employee satisfaction ES1 0.716

ES3 0.856

ES4 0.675

Employee loyalty EL1 0.524

EL2 0.675

EL3 0.805

EL4 0.798

a AVE represents average variance extracted.

unacceptably low factor loadings less than 0.5, large

measurement errors greater than 3.0 in absolute value,

and/or a high level of cross-loadings manifested by the

Lagrange Multiplier (LM) test (Bentler, 1995). Conse-

quently, the 10 items were deleted from the measure-

ment model.

After removing redundant or unreliable scales, the

possibility of multicollinearity among the remaining

scales was examined. Multicollinearity can lead to a

structural equation model whose path coefficients are

inflated, unreliable, and extremely sensitive to changes

in the values of indicators (Kline, 1998). Collinearity

among the indicators was measured by variance

inflation factors (VIF), which evaluates the degree to

which each variable is explained by the other variables

(Hair et al., 1998). All the remaining indicators

exhibited acceptable VIF values of less than 10,

confirming that multicollinearity is not significantly

present in the measurement model.

Next, Cronbach’s alphas and composite reliability

indices were examined. As shown in Table 3, most of

the constructs have a Cronbach’s alpha of 0.7 or higher,

with the exceptions of teamwork (0.61) and appraisal

systems (0.68). The composite reliability test also

reflects the internal consistency of the indicators

Measurement

error variance

AVEa Cronbach’s

alpha

Composite

reliability

0.556 0.612 0.826 0.824

0.213

0.397

0.439 0.576 0.723 0.731

0.407

0.528 0.511 0.760 0.757

0.560

0.377

0.563 0.427 0.610 0.598

0.583

0.569 0.553 0.679 0.709

0.324

0.230 0.692 0.808 0.817

0.385

0.487 0.567 0.772 0.795

0.267

0.544

0.725 0.504 0.792 0.798

0.544

0.351

0.363


Table 4

Measures of the model fit

Desirable range Measurement model Structural Model A Structural Model B

x2-Test statistic 336.068 357.552 314.667

x2-Test statistic/d.f. �3.00 2.100 2.008 1.787

Root mean square error of approximation (RMSEA) �0.08 0.059 0.056 0.050

RMSEA 90% confidence interval 0.050–0.067 0.048–0.064 0.040–0.058

Bentler–Bonett normed fit index (NFI) �0.90 0.887 0.939 0.946

Bentler–Bonett non-normed fit index (NNFI) �0.90 0.916 0.962 0.971

Comparative fit index (CFI) �0.90 0.936 0.968 0.975

Goodness of fit index (GFI) �0.80 0.910 0.884 0.897

Degrees of freedom (d.f.) 160.000 178.000 176.000

(Fornell and Larcker, 1981). As shown in Table 3, the

composite reliability estimates of all of the constructs

exceed the recommended level of 0.7 (Nunnally, 1978),

with the exception of teamwork. Although the teamwork

construct, did not meet both criteria, we decided to keep

the variable because it is such an essential and practical

component of TQM as supported by the literature.

Finally, we reran the confirmatory factor analysis with the

finalized indicators, and the result is summarized in

Table 3. As shown in Table 3, the indicators have

significant loadings on their assigned constructs.

The goodness of fit of the measurement model was

evaluated (see Table 4) using the ratio of chi-square

statistics to the degrees of freedom, root mean square

error of approximation (RMSEA), normed fit index

(NFI), non-normed fit index (NNFI), comparative fit

index (CFI), and goodness of fit index (GFI) (Bentler

and Bonett, 1980; Segars and Grover, 1998; MacCallum

et al., 1996). Segars and Grover (1998) suggest that the

ratio of Chi-square to the degrees of freedom should be

less than 3 for an acceptable model fit. The measure-

ment model’s ratio is 2.1. The RMSEA indicates overall

model fit per degree of freedom. Browne and Cudeck (in

Bollen and Long, 1993, p. 144) suggest that an RMSEA

value of less than 0.05 indicates a ‘‘close-fit,’’ and less

Table 5

Construct correlations and discriminant validity

Constructs TM EE ET

Top management commitment (TM) 0.782Employee empowerment (EE) 0.501 0.759Employee training (ET) 0.577 0.594 0.71Teamwork (TW) 0.300 0.248 0.30

Appraisal systems (AS) 0.419 0.343 0.38

Employee compensation (EC) 0.397 0.338 0.35

Employ satisfaction (ES) 0.453 0.534 0.47

Employee loyalty (EL) 0.368 0.354 0.31

The diagonal elements in bold are the square roots of the average varian

constructs. For discriminant validity, the diagonal elements should be larger

coefficients were significant at p < 0.01 level.

than 0.08 a ‘‘reasonable fit.’’ The RMSEA of the

measurement model is 0.059, and the measurement

model is in ‘‘reasonable fit.’’ The other fit indices

(NNFI = 0.916; CFI = 0.936; GFI = 0.910) meet the

suggested cutoff criteria except for NFI (0.887) which is

at the border line. Overall, the measurement model

appears to represent an acceptable model fit to the data.

4.2. Discriminant validity of the measurement

model

Discriminant validity of a construct implies that one

can empirically differentiate the construct from other

constructs that could be similar in nature (Kerlinger,

1992). Technically, the discriminant validity of a

construct can be assessed by comparing the average

variance extracted (AVE) by the construct and its shared

variances with other constructs (Fornell and Larcker,

1981). An AVE calibrates the amount of variance that is

captured by the construct in relation to the measurement

errors inherent in the construct’s indicators.

The result of the discriminant validity analysis is

summarized in Table 5. In Table 5, the diagonal

elements in bold are the square roots of AVEs, and the

offdiagonal elements are the bivariate correlations

TW AS EC ES EL

58 0.6533 0.253 0.7446 0.208 0.260 0.8321 0.327 0.311 0.408 0.7534 0.319 0.419 0.255 0.547 0.709

ce extracted. The offdiagonal elements are the correlations between

than any other corresponding row or column entry. All the correlation


between two constructs. All the diagonal elements are

larger than any other corresponding row or column entry

(correlation coefficients), indicating no obvious violation

of discriminant validity. Combining the results of the

analyses described previously, it can be concluded that

most of the factors in the measurement model possess

adequate reliability, low level of multicollinearity, and

satisfactory convergent and discriminant validity. There-

fore, the measurement model was deemed acceptable.

4.3. Structural Model A—without the mediation

effect of employee training

The overall fit statistics for Model A are reported in

Table 4, and its path coefficients and error variances are

reported in Fig. 2. For Model A, the RMSEA is 0.056,

indicating a ‘‘reasonable fit.’’ The ratio of Chi-square to

the degrees of freedom is 2.01, and all other fit indices

(NFI, NNFI, CFI, and GFI) exceed the suggested

threshold values, indicating that the tested Model A is a

sound structural model.

As illustrated in Fig. 2, it was found that all the path

coefficients between top management commitment

(TM) and TQM factors are positive and found to be

statistically significant ( p < 0.01). The results support

the literature’s assertion that top management support is

a key driver for TQM success. It appears, however, that

not all of the TQM practices contribute equally to

Fig. 2. Structural Model A (without the mediation effect of training).**Significant at p < 0.01 level; *significant at p < 0.05 level; ( ) t-statistics

enhancing employee satisfaction. As illustrated in

Fig. 2, among the five TQM practices under investiga-

tion, only three – employee empowerment (b61 = 0.41,

p < 0.01), teamwork (b63 = 0.25, p < 0.01), and

employee compensation (b65 = 0.19, p < 0.01) – have

a significantly positive association with employee

satisfaction. In turn, employee satisfaction appears

to have a positive and significant association with

employee loyalty (b7 = 0.79, p < 0.01).

4.4. Structural Model B—with the mediation effect

of employee training

As discussed in Section 2, the literature suggests the

possibility that the effect of employee empowerment

and teamwork on employee satisfaction can be

influenced by the degree of employee training (De

Macedo-Soares and Lucas, 1995; Pagell and LePine,

2002). Therefore, we created Model B by adding two

more paths (see Fig. 1) to Model A.

The overall fit statistics for Model B are reported in

Table 4, and its path coefficients and error variances

are reported in Fig. 3. The test results show that the

overall model fit is improved in Model B compared

with that of Model A. Specifically, the RMSEA of

Model B is 0.05, indicating a ‘‘close fit.’’ The ratio of

Chi-square to the degrees of freedom decreased from

2.01 (Model A) to 1.787. All other fit indices (NFI,

; [ ] error variance of each endogenous constructs.


Fig. 3. Structural Model B (with the mediation effect of training).**Significant at p < 0.01 level; *significant at p < 0.05 level; ( ) t-statistics; [ ] error variance of each endogenous constructs.

NNFI, CFI, and GFI) collectively suggest that the

tested Model B indicates a better fit than Model A. In

addition, we performed the Chi-square difference test,

which can determine whether a more restricted model

(Model B) is a significant improvement over the

simpler representation (Model A) (Bollen and Stine,

1993). The value of the Chi-square difference test

statistic (x2-test statistic = 42.885, d.f. = 2) was

statistically significant ( p < 0.01), indicating that

Model B fits to the data significantly better than

Model A. Therefore, Model B is accepted as the final

model to establish the empirical associations among

top management commitment, TQM practices,

employee satisfaction, and employee loyalty.

As illustrated in Fig. 3, a critical difference was

found in the association between top management

commitment and teamwork. Whereas Model A suggests

that top management commitment has a direct influence

on teamwork (g3 = 0.45, p < 0.01), Model B shows that

a positive influence of top management commitment on

teamwork is mediated through employee training

(g2 = 0.68, b3 = 0.37; p < 0.01). Although this differ-

ence appears marginal, it creates a fundamental

disparity in managerial implications. Model A implies

that even if the management is committed to employee

training, this commitment may not be rewarded because

an improved level of employee training does not lead to

better employee satisfaction. Therefore, the manage-

ment focus should be placed rather on employee

empowerment and teamwork. In contrast, Model B

suggests that the management be most committed to

improving employee training. According to Model B,

employee training is critical in improving both

employee empowerment and teamwork. Moreover, it

shows that teamwork performance (an influential factor

in enhancing employee satisfaction) can be only

improved by the level of employee training.

Other than the mediation effect of employee training,

most of the results in Model A are consistent with those of

Model B. As illustrated in Fig. 3, employee empower-

ment (b61 = 0.49, p < 0.01), teamwork (b63 = 0.26,

p < 0.01), and employee compensation (b65 = 0.21,

p < 0.01) have a significant and positive association

with employee satisfaction. Employee satisfaction is

found to have a positive and significant association with

employee loyalty (b7 = 0.79, p < 0.01).

4.5. Summary of the hypothesis test

The hypothesis test results are reported based on the

finalized model (Model B) and are summarized in

Table 6. Ten of the 13 hypothesized relationships were

found to be significant. Specifically, in the relationships

between top management commitment and TQM

practices, training was most significantly influenced

by top management commitment (g2 = 0.68, p < 0.01),


Table 6

Summary of the hypothesis test results based on structural Model B

Association Hypothesis Causal path Path coefficients t-Value Hypothesis supported

Top management commitment and TQM practice H1a TM! EE 0.229 2.243a Yes

H1b TM! ET 0.683 7.443b Yes

H1c TM! TW 0.159 1.232 No

H1d TM! AS 0.570 5.594b Yes

H1e TM! EC 0.484 6.292b Yes

TQM practice and employee satisfaction H2 EE! ES 0.493 3.511b Yes

H3 ET! ES �0.083 �0.587 No

H4 TW! ES 0.259 2.724b Yes

H5 AS! ES 0.134 1.825 No

H6 EC! ES 0.208 3.032b Yes

Employee satisfaction and employee loyalty H7 ES! EL 0.788 6.823b Yes

Mediation effect of training H8 ET! EE 0.602 5.097b Yes

H9 ET! TW 0.369 2.663b Yes

Legends: TM, top management commitment; EE, employee empowerment; ET, employee training; TW, teamwork; AS, appraisal systems; EC,

employee compensation; ES, employee satisfaction; EL, employee loyalty.a Significant at p < 0.05 level.b Significant at p < 0.01 level.

followed by appraisal systems (g4 = 0.57, p < 0.01),

employee compensation (g5 = 0.48, p < 0.01), and

employee empowerment (g1 = 0.23, p < 0.05). There-

fore, Hypotheses H1a and H1c–H1e are supported.

However, no evidence supports that top management

commitment directly influences teamwork.

As for the relationships between TQM practices and

employee satisfaction, employee empowerment was

found to be the most important determinant of employee

satisfaction, followed by teamwork and employee

compensation. Thus, Hypotheses 2, 4 and 6 are sup-

ported. However, Hypotheses 3 and 5, which predict that

employee training and appraisal systems have positive

impacts on employee satisfaction, are not confirmed.

Hypothesis 7 is also supported; that is, employee

satisfaction has a very strong and positive effect on

employee loyalty to their companies (b7 = 0.79,

p < 0.01). In terms of the mediation effect of employee

training, both Hypotheses 8 and 9 are also supported, as

training demonstrates its significant and positive

influence on employee empowerment (b1 = 0.60,

p < 0.01) and teamwork (b3 = 0.37, p < 0.01).

5. Findings and managerial implications

The major findings and their managerial implications

can be summarized as follows:

� M
aquiladora employees’ satisfaction significantly
affects their loyalty to the companies. Thus, it may

be necessary for maquiladora managers to enhance

overall employee satisfaction levels and in turn lessen

epidemic HR problems.

� A
mong the TQM practices investigated, empower-
ment, teamwork, and employee compensation have a

positive influence on maquiladora employees’ work

satisfaction. The strongest influence on employee

satisfaction stems from employee empowerment.

� T
op management commitment has demonstrated a
significant impact on the effectiveness of employee

empowerment, employee training, appraisal systems,

and employee compensation, but not on teamwork.

� E
mployee training significantly affects the effective-
ness of employee empowerment and teamwork, but

does not have a positive influence on employee

satisfaction directly. Thus, it is reasonable to conclude

that the impact of training is indirect and mediated

through employee empowerment and teamwork.

� I
n general, maquiladora management must place its
priority on employee training and employee empow-

erment to enhance employee satisfaction. In parti-

cular, employee satisfaction can be significantly

influenced by the level of employee training, which

contributes significantly to facilitating employee

empowerment and teamwork—the two most impor-

tant factors for employee satisfaction.

5.1. Satisfied employees are loyal

The outcome of this study shows that maquiladora

workers’ satisfaction had a significant, positive impact

on their loyalty to the companies, and its effect size is


substantially large (R2 = 0.62). Such a high correlation

between satisfaction and loyalty may be attributed to

unique Mexican culture. Specifically, Mexican workers

view their companies as patrons that take good care of

their employees. Thus, maquiladora employees’ satis-

faction can be largely dependent upon the manage-

ment’s role as a patron to whom they can be loyal (Paik

and Derick Sohn, 1998; Teagarden et al., 1992).

The seemingly evident hypothesis that ‘‘satisfied

employees are loyal’’ has been supported in many TQM

studies conducted in the US (Brown and Peterson, 1993;

Griffeth et al., 2000; Hom and Kinicki, 2001; Martensen

and Gronholdt, 2001). However, employee satisfaction

seems to have received relatively little attention from

the managers of foreign-owned maquiladoras. For

instance, those managers have often attributed their

TQM failures to HR problems, such as employees’ high

turnover rates and lack of commitment to quality, rather

than to the root cause of those problems, such as

employee dissatisfaction (Dowlatshahi, 1998; Knotts

and Tomlin, 1994; Lawrence and Lewis, 1993;

Lawrence and Yeh, 1994; McDermott, 1994). Indeed,

such a high level of employee turnover and absenteeism

has long plagued the maquiladoras, inhibited the

management efforts to pursue TQM initiatives, and

created barriers of entry to advanced manufacturing

facilities (Miller et al., 2001).

In contrast with many maquiladora firms, the two

firms surveyed here (Maquiladoras A and B) have

successfully practiced TQM for decades and main-

tained an annual employee turnover rate of less than

1%, which is far below the industry average. Although

we could not explicitly include employee turnover rates

in our study due to the limited number of companies

investigated, most of the TQM literature supports

strongly that employees’ satisfaction and loyalty are

negatively related to their intention of turnover (Griffeth

et al., 2000; Guimaraes, 1997; Hom and Kinicki, 2001).

Therefore, based on the results and the literature we

conclude that quality and HR-related problems (espe-

cially high employee turnover rates) in maquiladora

firms can be alleviated by placing management

emphasis on employee satisfaction within the TQM

framework.

5.2. Let maquiladora workers be empowered

Given that employee satisfaction and loyalty are

critical to operational success of a maquiladora firm,

what TQM practices should deserve more attention

from the management? The statistical results from the

structural Model B indicate that the most influential

factor for employee satisfaction is employee empower-

ment, followed by teamwork and employee compensa-

tion, but employee training and appraisal systems are

not significantly associated with employee satisfaction.

The finding that employee empowerment is strongly

influential to employee satisfaction provides a mean-

ingful implication. In the literature, the implementation

of employee empowerment in the maquiladora industry

has been viewed as a challenging task. The literature

recognizes that a high level of power distance, cultural

differences, and the lack of trust between the manage-

ment (from the US or other developed nations) and the

Mexican employees have been critical obstacles to

employee empowerment (Jun et al., 2004; Lawrence

and Lewis, 1993; Nicholls et al., 1999; Pavett and

Whitney, 1998; Knotts and Tomlin, 1994). The findings

of this research, however, indicate the possibility that

the TQM success of the sample firms may be accredited

to the level of employee empowerment. In other words,

the more empowered the employees are in improving

product and service quality, the more satisfied they are

(see the corresponding indicators in Appendix A).

These results indirectly support the previous finding that

the lack of employee empowerment may have been

impeding the successful implementation of TQM in

maquiladoras (Lawrence and Yeh, 1994; Robert et al.,

2000).

In addition to employee empowerment, teamwork

and employee compensation have positive impacts on

employee satisfaction. To a certain degree, this result

contradicts the literature that the concept of teamwork

does not fit into the Mexican culture due to the high

power distance and strong uncertainty avoidance in

Mexican society (Adler, 1999; Lawrence and Yeh,

1994). The disparity between other studies and the

present study may be attributed to the differences in

sampling of companies. Based on our results, it can be

recommended that management should strive to

institutionalize appropriate employee empowerment,

teamwork, and compensation programs in order to

improve employee satisfaction and employee loyalty.

5.3. Focus on training to synergize employee

satisfaction

Given that a great number of entry-level maquiladora

workers are from an agrarian background (Teagarden

et al., 1992), it is intuitive that top managers of the two

maquiladoras are devoted to training their employees.

Furthermore, employee training has a stronger influence

on employee empowerment and teamwork (two

important factors to employee satisfaction) than top


management commitment directly does (see the

magnitudes of the corresponding path coefficients in

Fig. 3). This means that in order to improve the

employee satisfaction of maquiladora workers, training

of employees should be management priority. These

well-trained employees will then become qualified for a

higher level of employee empowerment and teamwork,

and as a result employee satisfaction and loyalty will be

improved.

Besides training, top management commitment

appears to significantly affect the effectiveness of

appraisal systems and employee compensation. A direct

influence of top management on employee empower-

ment is also significant. This result is consistent with

findings in the HRM literature (Ahire et al., 1996;

Nicholls et al., 1999; Teagarden et al., 1992). In many

maquiladoras’ HR practices, an emphasis has been

placed on identifying individuals with great potential to

become supervisors. Accordingly, their appraisal and

employee compensation systems may emphasize

individual performance more than team performance

(Teagarden et al., 1992), which conflicts with the

principles of TQM. The employees in our sample firms,

however, responded that one of their important

performance criteria has been how well they work in

teams (AS3 in Appendix A). This result suggests that

top managers need not only show strong support for the

appraisal and compensation systems, but also maintain

consistency between other TQM initiatives and

appraisal and compensation systems.

5.4. Implication for TQM universality

The findings of this study appear to support the

universality perspective of TQM grounded in institu-

tional theory. Although the present study limited its

scope to HR-focused TQM practices, the hypothesis-

test results indicate that many of the empirical

associations among top management commitment,

TQM practices, and employee satisfaction supported

in the TQM and HRM literature are also found

significant in this study of the two Mexican maquila-

doras. In other words, TQM as a holistic management

philosophy is applicable across countries.

Moreover, the finding that top management commit-

ment to TQM strongly correlates with employee

training and employee empowerment provides a

meaningful implication. According to human capital

theorists, firms must protect themselves from the

transfer of human capital to other firms because

competent employees can be a source of competitive

advantage, like other assets of the firms (Lepak and

Snell, 1999). Employee training is an important vehicle

to develop human capital, and firms should provide job-

or firm-specific training (rather than general training)

because these specific skills may not be transferable or

less valuable to other firms (Becker, 1976).

From this standpoint, the high employee turnover

rates and the limited implementation of employee

empowerment in most maquiladoras are certainly a

piece of evidence for their lack of interest in offering

firm-specific employee training. The epidemic HR

problems and TQM failures may also be driven by the

industry negligence in which employees are not

empowered nor trained properly as future assets. In

this context, our findings strongly support that the

fundamentals of TQM, including employee training,

teamwork, and empowerment, must be implemented

simultaneously, regardless of organizational and cul-

tural contexts (Sousa and Voss, 2002). Recently, the

maquiladora industry has recognized the importance of

training, providing employees with a wide variety of

training and educational programs (Jun et al., 2004;

Solis et al., 2000).

6. Conclusion

In this study, we examined the transferability of

TQM practices to offshore manufacturing firms by

validating the direct and indirect relations among HR-

focused TQM practices and their effects on employee

satisfaction. The present study makes several important

contributions to both the TQM and OB/HRM literature.

First, while a majority of empirical TQM studies has

focused on manufacturing firms in the developed

countries, this study investigated the world-class

MNCs’ affiliates located in Mexico. To our knowledge,

the present study is one of the few studies, which

attempt to find key attributes for a successful TQM

implementation in maquiladoras – rather than causes of

failures – by focusing on the leading maquiladora firms.

Second, unlike the previous studies that focused on

empirical associations among TQM, organizational

performance and customer satisfaction, this study is

directed towards understanding the impact of a TQM

framework on employee satisfaction and loyalty. This is

an important contribution, given that HR problems with

Mexican workers, such as high rates of employee

turnover and absenteeism, have been often cited as a

critical reason for the quality and productivity crisis in

the maquiladora industry (Jun et al., 2004; Knotts and

Tomlin, 1994; McDermott, 1994).

Finally, by analyzing two leading maquiladoras’

TQM practices, the study provides comprehensive


implications that can be benchmarked by many other

MNCs operating in Mexico. These MNCs may include

the ones which have faced substantial impediments,

such as high employee turnover and absenteeism, low-

employee morale, and foreign managers’ lack of

understanding of the Mexican culture. We show that

even in the TQM framework employee satisfaction

can be indirectly enhanced by the management

emphasis on well-conceived training programs com-

bined with both individual and team-oriented perfor-

mance appraisal and compensation systems. In the two

maquiladora companies investigated, it seems that

employee training plays a critical role as a foundation

for facilitating employee empowerment and team-

work—two most influential factors for employee

satisfaction.

There are some limitations of the current study,

which suggest some directions for possible extensions

in the future. First, the study is based on data collected

from two maquiladoras in Mexico. Although there may

Appendix A

Please indicate your experience and perception on each stat

2, disagree; 3, neutral; 4, agree; 5, strongly agree.

Top management commitment (TM)

TM1 Top management views quality as being more important th

TM2 Top management allocates adequate resources toward effort

TM3 Top management is visibly and explicitly committed to qua

Employee empowerment (EE)

EE1 I am provided with substantial autonomy and responsibility

EE2 I am encouraged to develop new ways to provide better pro

EE3 I am not punished for quality improvement ideas that are u

EE4 I am provided with sufficient information to arrive at good

Employee training (ET)

ET1 I have received sufficient training at this firm to do my job

ET2 I am trained in quality improvement skills

ET3 Much of the training at our facility emphasizes product and

ET4 I am trained in group-discussion and communication techni

Teamwork (TW)

TW1 Teams are used extensively at this firm

TW2 Product and service quality teams are formed for the long r

TW3 I think that my teams are effective in producing quality goo

Appraisal systems (AS)

AS1 The quality of my work is an important factor in evaluating

AS2 I am regularly given feedback on my job performance

AS3 Part of my job performance evaluation is based on how we

AS4 Part of my job performance evaluation is based on custome

Employee compensation (EC)

EC1 I am satisfied with the pay that I receive

EC2 I earn more than others who do similar work at other firms

EC3 My pay encourages me to improve the quality of my work

be some commonality among all the offshore manu-

facturing bases, readers should be cautioned in

generalizing the results, especially to the affiliates in

other countries. Thus, future research may be conducted

to verify these results by studying the offshore

manufacturing firms located in a variety of regions.

In addition, the present study employed a cross-

sectional survey method, which is limited in exploring

longitudinal evidence of how TQM evolves in

organizations. If one can examine the changes in

employee satisfaction and loyalty at different stages of

TQM implementation, it would be more helpful in

identifying a specific causality between TQM and

employee satisfaction and loyalty. Finally, it should be

noted that since the present study focused only on the

HRM practices commonly accepted as key TQM

attributes (see Table 1), other important HRM practices,

such as employee selection, employment security, and

selective hiring of new personnel, were excluded in the

study’s model.

ement, using the following scales: 1, strongly disagree;

an cost

s to improve quality

lity

ducts and services

nsuccessful

quality suggestions

effectively

service quality

ques

un

ds and services

my job performance

ll I work with teams

r feedback on product and service quality


EC4 I will receive a reward if I do something to improve product and service quality

EC5 The benefits, such as vacation time and medical insurance that I receive here are better than those I could get at similar firms

Employee loyalty (EL)

EL1 I am prepared to put in a great deal of effort beyond what is normally expected in order to help this organization be successful

EL2 I plan to make this company my own career

EL3 I care about the fate of this company

EL4 I feel a lot of loyalty to this organization

Employee satisfaction (ES)

ES1 I would recommend this company to a friend if he/she were looking for a job

ES2 I feel personal satisfaction when I do my job well

ES3 I am proud to tell people that I am part of this company

ES4 This is the best organization for me to work for

Appendix A (Continued )

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