A Resource Dependence Theory Perspective of ISO 9000

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Journal of Operations Management 29 (2011) 49–64

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Journal of Operations Management

j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / j o m

A resource dependence theory perspective of ISO 9000 in managing

organizational environment

Prakash J. Singh a,∗, Damien Power a, Sum Chee Chuong b

a Department of Management & Marketing, The University of Melbourne, VIC 3010, Australiab Department of Decision Sciences, NUS Business School, National University of Singapore, Singapore

a r t i c l e i n f o

Article history:

Received 13 January 2009

Received in revised form 31 March 2010

Accepted 13 April 2010

Available online 21 April 2010

Keywords:

ISO 9000 standard

Quality management

Organizational environment

Resource dependence theory

a b s t r a c t

More than 900,000 organizations worldwide have registered to the ISO 9000 quality management

standard.Despiteitsgrowingpopularity,fewstudieshaveofferedacoherenttheoreticalbasisforthestan-

dard’s appeal. A theory-based explanation enhances understanding and appreciation for the standard,

and provides clarity on how the standard benefits organizations. In this paper, we invoke the resource

dependence theory (RDT) to purport that the standard is used by organizations as a tool to manage their

organizationalenvironment.It doesthis by specifyingproceduresthat organizationsneed to manage their

organization–environment boundary spanning processes. Using the RDT perspective, a model with three

key constructs embodying ISO 9000 was developed: internal processes, relationships with customers

and relationships with suppliers. The latter two were treated as being part of the task environment. We

predicted that the external aspects of the standard affect operating performance (a measure of effec-

tiveness), both directly and through internal processes. Empirical data from 416 ISO 9000 registered

Australian manufacturing plants validated the RDT perspective, and suggest that the three constructs,

individually and in isolation, are not as effective as when they are considered together. By invoking RDT,

a new theoretical viewpoint to ISO 9000 has been developed that adds to other theoretical perspectives,

and goes some way to explaining the growing popularity of this standard with organizations.

© 2010 Elsevier B.V. All rights reserved.

1. Introduction

Since its inception, there has been a remarkable growth in orga-

nizations registeringto the ISO 9000qualitymanagement standard,

with close to 900,000 registered organizations in existence in 170

countries (International Organization for Standardization, 2008).

Many researchers have sought to understand why organizations

choose to register. Much of this research is focused on inter-

nal justifications, with the spotlight on how the standard assists

organizations to intrinsically improve their internal organizational

processes and performance (Adams, 1999; Benner and Tushman,

2002, 2003; Boiral, 2003; Tzelepis et al., 2006; Benner and Veloso,2008). Others have explained the organizations’ decisions to reg-

ister from an external perspective (Anderson et al., 1999; Guler

et al., 2002; Terlaak and King, 2006; Clougherty and Grajek, 2008).

This research stream has shown that some organizations register

to comply with market expectations and regulatory requirements,

and to improve their locational advantage.

∗ Corresponding author. Tel.: +61 3 8344 4713; fax: +61 3 9349 4293.

E-mail address: [email protected] (P.J. Singh).

These studies suggest that the standard plays a dual role in

addressing both internal and external functions. A close examina-

tion of the standard confirms this duality: the standard requires

organizations to develop and implement procedures that ensure

within-organization process variation reduction and control, as

well as coordinative processes with key external stakeholders

such as customers and suppliers. As such, it is evident that ISO

9000 extensively addresses both internal organizational processes

and external organization–environment boundary spanning activ-

ities. Yet, a review of the literature shows that studies that

address the dual nature are limited and lack a clear theoret-

ical focus. Those that have (e.g., Boiral and Roy, 2007; Navehet al., 2004; Naveh and Marcus, 2004, 2005; Corbett et al., 2005 )

done so in an indirect manner and from a myriad of theoret-

ical perspectives. The extant literature reveals an incomplete,

fragmented and partial understanding of ISO 9000 registration.

More importantly, few studies have examined and offered an

integrative, theoretical exposition of the dual functionality of

ISO 9000.

In this study, we integrate the literature by proposing a the-

oretical basis that could account for its widespread interest. The

theoretical basis is achieved through: (1) identification of a theory

that integrates existing literature on the duality of ISO 9000; (2)

0272-6963/$ – see front matter © 2010 Elsevier B.V. All rights reserved.

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50 P.J. Singh et al. / Journal of Operations Management 29 (2011) 49–64

development of a model based on the identified theory; and (3)

empirical testing of the theory-based model.

Given the internal and external perspectives of the standard,

we invoke ideas from a body of knowledge that has hitherto been

largely neglected, namely, the organization–environment relation-

ships area. We propose that the resource dependence theory (RDT)

is a suitable organization–environment relationships theory to

explain theduality of ISO9000. As describedby Pfeffer and Salancik

(1978), RDT proposes that organizations engage with their envi-

ronment to obtain resources. The basic assumptions of RDT are

that organizations are rarely internally self-sufficient with respect

to strategically important resources, thereby leading to dependen-

cies on otherorganizations(Heide,1994); and organizationsseek to

reduce uncertainty and manage thisdependencyby carefullystruc-

turing their relationships with other organizations through formal

and semiformal means (Ulrich and Barney, 1984).

Invoking RDT, we posit that ISO 9000 is a tool that organizations

use to deal with conditions in their organizational environment.

Consistent with this theory, organizations use the standard to:

make changes to their internal processes to adapt to their orga-

nizational environments; attempt to change their organizational

environments; and do both of these if and when possible. We pos-

tulate thatthe standard plays facilitative internal and external roles

in enabling organizations to deal with contingencies in their envi-ronment.

This postulation is evaluated by analyzing the standard through

the lens of RDT because, prima facie, there isa goodfit between the

phenomenon (i.e., ISO 9000) and the scope of the theory. As such,

we identify the key constructs that embody the standard. We then

develop a model that relates these constructs. The theory-based

model was then tested for empirical validity with data from 416

Australian manufacturing plants that are ISO 9000 registered.

Our study makes several useful contributions. By providing

substantive theoretical grounding, we consolidate and enrich the

literature on a popular management context (i.e., ISO 9000 regis-

tration). Our theory-driven approach creates a more rigorous and

coherent understanding of the conceptual and practical aspects of

ISO 9000 registration. The theory-based model depicting relation-ships between the internal and external process constructs offers

prescriptive and managerial insights on the adoption of ISO 9000.

Our study also illustrates the applicability of the RDT to a new con-

text,therebydemonstrating an additional application of the theory.

2. Literature review

2.1. Why organizations register to ISO 9000

Despite widespread popularity of thestandard, there is still con-

siderable debate regarding the primary driving forces of ongoing

adoption. Research that has addressed this issue can be grouped

into two categories: those that focus on internal justifications,and others that focus on external factors. Studies that are focused

internally are premised on the notion that the standard assists

organizations to improve their internal organizational processes

and performance (Adams,1999;Benner andTushman, 2002, 2003;

Boiral, 2003; Tzelepis et al., 2006; Benner and Veloso, 2008).

However, empiricalevidencefor thisperspective is not allthat com-

pelling, with many studies showing that ISO 9000 based internal

management practices account for only modest levels of variance

in operating and other measures of performance (Terziovski et al.,

1997; Simmons andWhite, 1999; Lima et al., 2000; Rahman, 2001).

Further, questions have been raised as to why an organization

would go through the effort and expense of formal registration if

the motivation is limited only to internal process improvements

(Terlaak and King, 2006).

Partly as a reaction to this, several researchers have sought to

explain registration from an external perspective. This research

stream has shown that some organizations register to comply

with market and industry expectations, and conform to regulatory

requirements (Anderson et al., 1999), with the spread occurring

through isomorphic processes of coercive, normative and mimetic

behaviors(Corbett andKirsch, 2001; Guleret al.,2002; Boiral, 2003;

Clougherty and Grajek, 2008). Also, some organizations use the

standard as a signal of their status to the market (Terlaak and

King, 2006). If these explanations (i.e., that organizations regis-

ter for purely externally motivated reasons) are taken to their

logical conclusion, then organizations are likely to make mini-

mum levels of change to their internal processes and practices,

just enough to achieve registration. As a consequence, significant

improvements in internal performance are unlikely to be detected.

However, some organizations do seem to achieve discernible oper-

ating benefits through registration (Carr et al., 1997; Terziovski

et al., 2003; Corbett et al., 2005), and so externally driven explana-

tionsalone do not adequately account for an organization’sdecision

to register. Further, implementationof the standardimplies process

mapping, and by extension, in many cases, changes to processes in

orderto achieve accreditation. Thereare, therefore,implications for

altered internal processes even if motivation is purely externally

driven.The limited number of studies that considered both motivations

shows a general lack of convergence.Some studies show that inter-

nal motivations are more important than external motivations.

For example, Naveh and Marcus (2004) showed that the extent

to which ISO 9000 is associated with performance improvements

depends more on the level of its assimilation with the existing

internal processescombinedwith thedegree to which an organiza-

tion goes beyond the minimal requirements of the standard. They

also found that the extent to which the standard’s implementation

was externally coordinated with suppliers and customers was less

important. Similarly, Corbett et al. (2005) f ound that performance

improvements as a result of registration couldbe attributed moreto

internal productivity improvements than externally derived mar-

keting benefits.Other studies show a more complex relationship between inter-

nal and external motivations. For example, Naveh et al. (2004)

showed that organizations that register early (first movers) do not

necessarily gain a competitive advantage over late registrants (sec-

ond movers). Instead of timing, learning was found to be more

important. First movers register to the standard because of real

needs within the organization (technical efficiency), and these

organizations learn from their own experiences. Second movers,

on the other hand, register because of customer pressure and fear

of falling behind competitors (external pressure); and they learn

fromothers.First andsecond movers follow differentpathways, but

generate similar outcomes. In a related study, Naveh and Marcus

(2005) f ound that while installationof ISO9000requires both inter-

nal integration and external coordination, organizations achieve adistinct operating advantage from the standard when they effec-

tively internalize it by using it in daily practice and as a catalyst for

change.

In toto, the literature provides a rather fragmented and par-

tial understanding of why organizations register to the standard,

how it works and the benefits it provides. To improve clarity,

the standard needs to be reappraised to identify its key features

in a more holistic manner. Further, since the standard is replete

with prescriptions on organization–environment boundary span-

ning activities (see, for example, clause 5.2 Customer focus and

7.4 Purchasing, ISO 9001:2000), we believe that this aspect needs

careful analysis as this perspective has the potential to provide

insights into the standard that hitherto has not been covered in the

literature.



P.J. Singh et al. / Journal of Operations Management 29 (2011) 49–64 51

2.2. Organizational environment, resource dependence theory

and ISO 9000

Researchers in strategic management and organization theory

have long recognized the important role that organizational envi-

ronment plays in influencing the ability of organizations to survive

and prosper (Bourgeois, 1980; Frishammar, 2006; Cannon and St

John, 2007). The literature shows that environment has been stud-

ied from three perspectives: environment as objects, attributes or

perceptions (Bourgeois, 1980). Viewing environment as objects,

Dill (1958) and Bourgeois (1980) proposed a two-level catego-

rization: ‘task’ and ‘general’ environments. The task environment

consists of suppliers, customers, and other stakeholders that the

organization closely interacts with and whose actions can directly

affect the organization, while the general environment is com-

posed of multiple task environments that are sources of general

social, political, economic, demographic and technological trends

(Bourgeois, 1980). While task environment is within the realm

of an organization’s influence, the general environment is usu-

ally “remote” (Doty et al., 2006, p. 269) and cannot be influenced

easily by an organization. Researchers have identified complex-

ity, dynamism and munificence as the three key properties of

environment (Dess and Beard, 1984; Sharfman and Dean, 1991).

Complexity refers to the heterogeneity and range of an organi-zation’s activities; dynamism refers to unpredictable change in

environmental conditions faced by an organization; and munifi-

cence is the extent to which an environment supports growth of

organizations within it, and is often measured on a reverse scale

to environmental hostility (Ward et al., 1995). As for perceptions,

researchers use either objective or subjective measurement meth-

ods of the environment (Bourgeois, 1980; Boyd et al., 1993; Doty

et al., 2006).

A number of models andtheories have been proposed to explic-

itly relate the interactions between organizations in the context

of the organizational environment. These include transaction cost

economics (Coase, 1937; Williamson, 1975), institutional theory

(DiMaggio and Powell, 1983), industry structure model (Porter,

1980), cognitive model (Weick, 1979), population ecology model(Hannan and Freeman, 1977) and resource dependence theory

(Pfeffer and Salancik, 1978). Each of these models and theories

vary in their assumptions on what composes the environment, the

process and causes of environmental change, how managers and

researchers conceptualize it and how organizations respond to it

(Prescott, 1986; Frishammar, 2006).

In this paper, we have chosen to use the resource dependence

theory (RDT). RDT is based on social exchange theory as pro-

posed by Emerson (1962) and became popular as a result of its

full exposition by Pfeffer and Salancik (1978). According to Pfeffer

and Salancik, organizations depend on others in their environment

for resources to ensure their ongoing viability. RDT predicts the

types of responses that organizations would exhibit depending on

the level and nature of dependence they develop, and the rela-tive power of all players. It also provides guidance on how the

resource acquisition process can be facilitated and sustained. A

primary issue that RDT addresses, therefore, is the interchange of

resources between trading partners as a means by which environ-

mental uncertainty is managed. In the last 40 years, many different

phenomena have been investigated using this theoretical lens,

including several operations management concepts (Handfield,

1993; Ward et al., 1995; Paulraj and Chen, 2007 ).

RDT was chosen because it extensively covers organization–

environment boundary spanning activities, a view of ISO 9000 that

is of particular relevance to this study.Specifically, many of the key

concepts, relationships and predictions thatRDT coversare directly

relevant to the objectives and purposes of ISO 9000. This can be

illustrated with several examples.

First, RDT proposes that organizations that lack essential

resources to achieve their desired organizational outcomes will

seek to establish relationships with others to obtain the needed

resources (Pfeffer and Salancik, 1978, p. 2). The ISO 9000 standard

has several clauses that specify how these necessary resources can

be acquired.For instance, clauses 5.5.2 (Note), 7.4.1,7.4.2, and7.4.3

specify the resource acquisition processes relating to reliable and

qualifiedsuppliersand clause 4.1deals withoutsourced parties that

the organization has control over.

Second, RDT includes “customer–supplier relationships”

(Pfeffer and Salancik, 1978, p. 2) as a form of linkage that organi-

zations have to their environments. Several elements of the ISO

9000 standard deal with customer–supplier relationship aspects.

For example, clause 7.4.1 specifies that the organization has to

exert control over suppliers to ensure that purchased products

from external sources conform to specifications. Clause 7.4.1 also

states that supplier selection, evaluation and re-evaluation have to

be established in accordance to the organization’s requirements.

Proper verification processes including inspection and supplier

site verification have to be set up to ensure supply quality (Clause

7.4.3).

Third,the relationships describedby RDTare expressedas coali-

tions being formed between trading partners largely with the aim

of managing uncertainty.RDT suggests that: “. . .organizations seekto avoid dependencies and external control, and at the same time,

increase stability and certainty in their own resource exchanges”

(Pfeffer and Salancik, 1978, p. 261). ISO 9000 provides these capa-

bilities to organizations through the formalized frameworks that

ISO standards are built upon. A primary goal of the ISO 9000 stan-

dard is to reduce processes to a form that can be mapped, learned

and replicated with a low level of variation. The incorporation into

the standard of specific clauses outlining how this maybe achieved

with trading partners is consistent with the objective of reducing

variation at the inter-firm level. This objective can therefore be

explainedin terms of RDTas being to reduceuncertainty in thetask

environment through the building of trading partner coalitions.

Fourth, RDT conceptualizes the effects of environments on orga-

nizations using external and internal perspectives (Pfeffer andSalancik, 1978, p. 2). The external perspective relates to orga-

nizational effectiveness that pertains to the “assessment of the

organization’s output and activities by each of the various groups

and participants (i.e., customers)” (Pfeffer and Salancik, 1978, p.

2). On the other hand, the internal perspective is associated with

organizational efficiency that accounts for the “internal evalua-

tion of the amount of resources consumed in the process of doing

this activity” (Pfeffer and Salancik, 1978, p. 2). Both organizational

effectiveness and efficiency are critical to the organization’s con-

tinued survival and success. In the environmental context of ISO

9000standard,the external andinternalperspectives correspondto

customer relationship activities and internal process management

respectively. Specific customer relationship activities addressed

in the standard include: fulfillment of customer requirementsand enhancement of customer satisfaction (e.g., through customer

feedback) (clauses 5.2 and 5.6.2); customer-related processes such

as customer engagement, customer requirements, product quality,

product delivery, customer communication, and customer com-

plaints (clause 7.2); proper treatment of customer property (clause

7.5.4); and, guidelines on the monitoring and measurement of cus-

tomer satisfaction (clause 8.2.1). Likewise, the management and

improvement of internal processes in relation to resource acqui-

sition are addressed in the standard in the following manner:

stipulation that organizations should not only determine the pro-

cesses for the quality management system but also ensure that

resources are made available to support the operation, control

and improvement of these processes (clause 4.1); affirmation of

the importance of exercising control over outsourced processes




(clause 4.1, Note 3); top management team being responsible for

improvement of internal processes and the provision of resources

(clause 5.1(e)), commitment to improve quality processes through

planning (clause 5.4), review (clause 5.6), policy (clause 5.3) and

internal communications(clause 5.5.3); resources to be provided to

enhance the competence and skills of employees through training

and education (clauses 6.2.1 and 6.2.2), and improve the infras-

tructure and work environment (clauses 6.3 and 6.4); and, proper

measurement, analysis and audit procedures to be established to

improve processes (clause 8.2.3).

Fifth, RDT suggests that there are some “social–legal apparatus”

(Pfeffer and Salancik, 1978, p. 2) that define and control the nature

and limits of the relationship between an organization and players

in its environment. The ISO 9000 standard could be viewed as one

such apparatus, given the prescriptive natureof some of itsclauses.

Such an apparatus has the function of providing boundaries within

which trading partners can operate. These boundaries are infor-

mally defined by the nature of the resources being exchanged, but

even long-term trading partners require some form of contractual

definition of the limits of their relationship. ISO 9000 performs this

role in defining the nature and limits of the interactions that are

appropriate to meet the requirements of the standard (e.g., clauses

7.4 and 8.2.1).

Sixth, Pfeffer and Salancik (1978, p. 193) state that: “. . .becauseorganizations are only components of a larger social system and

depend upon that system’s support for continuing existence, orga-

nizations’ goals and activities must be legitimate or of worth to

that larger social system”. ISO 9000 could be used as a source of

“legitimacy” by organizations in a form suggested by Sherer and

Lee (2002), that is, an accepted way of doing things with a techni-

cal rationale. Evidence of this legitimacy to society is provided by

the rapid uptake of the standard since its inception, and by the fact

that in economies where it has been established for long periods, it

has assumed the status of an “order qualifier”, or a basic condition

that must be met in order to do business.

Seventh, RDT propounds that organizations engage with their

environment by adapting to it, changing the environment to suit

their circumstances (the “enacted” environment), or doing both.ISO 9000 could assist organizations in achieving these outcomes

either as a result of the value that trading partners (both cur-

rent and potential) place on achieving certification (adaptation), or

through developing closer collaborations with other organizations

(changing the environment). The speed with which the standard

has been adopted and recognized provides evidence of ISO 9000

facilitating adaptation. Further, the incorporation of collaborative

frameworks into the standard has been the result of an acknowl-

edgement that processes are not just cross-functional, but also

cross-organizational. The formal recognition of this in the stan-

dard is evidence of a perceived need to better manage (at least)

the task environment through initiating change. As such, ISO 9000

is pro-active in providing frameworks for adaptation and change

consistent with the principles of RDT.From the examples above, we believe that there is a good ‘fit’

between the phenomenon under study (ISO 9000) and the theory

chosen for analysis (RDT).

2.3. Effectiveness of ISO 9000

RDT defines effectiveness as how well an organization is able

to manage the demands placed on it by interest groups who

provide resources and support to it (Pfeffer and Salancik, 1978).

As such, effectiveness is externally assessed. In the case of ISO

9000, its externally based effectiveness could be assessed through

the signaling effect generated by registration, i.e., an organiza-

tion achieving registration status would be an indication of the

standard’s effectiveness for that organization. However, organiza-

tions do derive greater benefits from the standard. For example,

benefits from registration are accentuated when: the standard is

assimilated within existing internal processes which then perform

beyond minimal requirements of the standard (Naveh and Marcus,

2004); learning from own and others’ experiencesare incorporated

in the implementation process (Naveh et al., 2004); and organiza-

tions internalize the standard by using it in daily practice and as a

catalyst forchange (Naveh and Marcus, 2005). These suggest that to

assessthe effectiveness of ISO 9000, a measure beyond the signaling

effect of registration status is needed.

Among typical measures of performance (such as financial,

customer-related and operating), operating performance is prob-

ably best for capturing the effectiveness of ISO 9000. Operating

performance is often measured by variables such as inventory lev-

els, defective product rates, reliability performance, lead times,

delivery performance, capacity utilization rates and wastage rates

of the organization (Venkatraman and Ramanujam, 1986; Gupta

and Somers, 1996; Terziovski et al., 1997, 2003; Tan et al., 1998;

Naveh and Marcus, 2004; Naveh et al., 2004). It depends not only

on its internal operations but also on its engagement with exter-

nal stakeholders such as customers and suppliers. For example, the

level of inventorycarried by an organizationis affected by therelia-

bility of its suppliers (raw materials), operations (work-in-process

inventories) and coordination with its customers (finished goods).Studies that have examined the relationship between ISO

9000 registration and operating performance show no conclu-

sive evidence of the standard’s effectiveness. Some studies found

insignificant differences in operational and financial performance

between registered and non-registered organizations (Terziovski

et al., 1997; Simmons and White, 1999; Lima et al., 2000; Rahman,

2001), whilst others show that ISO 9000 registered organiza-

tions outperform non-registered organizations (Carr et al., 1997;

Terziovski et al., 2003; Corbett et al., 2005). In some cases, ISO

9000 registration appears to affect certain types of performance.

For example, registration improved operating performance, but not

business performance (Naveh and Marcus, 2005). This led Corbett

and Kirsch (2001, p. 328) to state that “[t]here is little evidence

on how ISO 9000 certification affects quality or business perfor-mance”. Likewise, Naveh andMarcus (2005,pp. 4–5) comment that

“implementation of ISO 9000 should make an organization’s oper-

ating performance go up, but consistent results that could verify

this proposition are not found in the literature”.

2.4. Theoretical model and hypotheses

Fig. 1 outlines the theoretical model that guides this study. The

model proposes that the standard can be defined in terms of three

key constructs: internal processes, relationships with customers

and relationships with suppliers. We treat the internal processes

construct as being internal to the focal organization. For organi-

zational environment, we focus only on the ‘task’ environment as

organizations are able to influence this, and not the ‘general’ envi-ronment which organizations are not able to directly influence.

The two constructs that deal with relationships with customers

and suppliers are placed in the task environment to reflect impor-

tant potential sources of resource linkages. Following the literature

(Handfield, 1993; Ward et al., 1995; Badri et al., 2000; Ward and

Duray, 2000; Kaufmann and Carter, 2002; Fuentes-Fuentes et al.,

2004; Sia et al., 2004), these are treated as pure exogenous vari-

ables and in this sense reflect the boundary spanning activities of

an organization. For assessing predictive validity and effectiveness

of the standard, we include an endogenous operating performance

construct. We propose a partially mediated model where the two

constructs in the task environment affect operating performance

directly and through the internal processes construct. This reflects

the boundary spanning activity, the filtering of resource require-




Fig. 1. Theoretical model.

mentsand availability, andthe propensity toadapt. In thefollowing

sub-sections, we reappraise the standard and associated literature

to identify the elements andpredicted relationships, andexplain in

more detail the concepts and relationships hypothesized in Fig. 1.

2.4.1. Internal processes

The standard has a very strong focus on the internal processes

of implementing organizations. Indeed, the philosophy underlying

much of the standard is that organizations with solid operations

and processes will be in the best position to influence the quality

of their products and services (Withers et al., 1997). The standarddefines processes as linked activities that use resources to enable

the transformation of inputs into outputs (ISO 9000: 2000, p.v). At

a more detailed level, this process approach involves a strong focus

on quality assurance and quality control activities within an orga-

nization. For organizations that successfully implement and utilize

ISO 9000, the main benefit is the development of an effective sys-

temthat assists in eliminating errorsand thereby saves money that

is otherwise spent on rework and scrap (McAdam and McKeown,

1999). The standard requires that allprocesses andprocedures that

affect quality be documented (Kirchenstein and Blake, 1999). This

makes ISO 9000 a highly documentation oriented system (Withers

et al., 1997; Hoyle, 1998; Navehet al., 2004). Taking this positively,

ISO 9000 assists organizations to develop sound communication

systems through carefully documented procedures, process perfor-mance and failures (Tsiotras and Gotzamani, 1996; Withers et al.,

1997; Anderson et al., 1999). In sum, in a registered organization,

processes and activities affecting quality must be planned, con-

trolled and documented ( Johnson, 1997; Anderson et al., 1999). If

theseare donewell, thenorganizationswould benefit fromreduced

error rates, scrap and rework. We therefore hypothesize that:

H1. The extent to which internal processes are based on ISO 9000

principles is positively related to operating performance.

2.4.2. Relationships with customers

ISO 9000 recognizes the contemporary reality of understand-

ing and meeting customer preferences in order for organizations

to compete effectively (Hoyle, 1998; Conti, 1999). As such, the

standard has declared ‘customer focus’ as one of its key princi-

ples, stating that “organizations depend on their customers and

therefore should understand current and future customer needs,

shouldmeet customer requirementsand striveto exceed customer

expectations” (clause 4.3(a), Customer focus, ISO 9004:2000). An

important objective of the standard is to give customers an assur-

ance about the quality of products or services supplied (Carr

et al., 1997). In pursuit of this, organizations need processes

to produce products/services speedily and consistently to meet

customer expectations (Naveh et al., 2004). A well-designed, well-

implemented andcarefullymanagedISO 9000 quality managementsystem provides confidence to implementing organizations that

the output of its processes meets customer expectations and

requirements ( Johnson, 1997). In practice, this requires orga-

nizations to carefully and systematically determine customer

requirements (Karapetrovic and Willborn, 2001; Terziovski et al.,

2003) so that mistakes are not made in interpreting them (clause

7.2, contract review process, ISO 9000:2000). Should mistakes

occur, organizations must have appropriate processes for resolu-

tion. A continuous review and re-design of processes to meet the

changing requirements of customers can therefore be facilitated by

implementation of the ISO 9000 standard. The standard therefore

can serve as a formal mechanism for dependencies to be formed

between an organization and its customers through creating legit-

imacy, promoting stability of demand, and creation of resourcebasedlinkages (i.e.,the supplying organization becomes a ‘resource

of choice’).

Further, thereis evidence thatintegrating internalprocessesand

customer interfacing activities can have a positive impact on oper-

ating performance (Frohlich and Westbrook, 2001; Vickery et al.,

2003). The explanation can be found in examples such as: access

to point of sale (POS) and other relevant customer data facilitat-

ing better capacity planning and scheduling (Cagliano et al., 2003);

delivery performance being facilitated by systems enabling cus-

tomers to configure and specify product features (Stewart and

O’Brien, 2005); and the relationship between lead time reduction

andthe availabilityof unambiguousdemand data (De Treville et al.,

2004). At a practical level, clearly specified contracts allow the

operations function to develop more efficient and effective produc-




tion and fulfillment strategies. The ISO 9000 standard incorporates

many of these factors into requirements by defining customer

relationships in terms of awareness of customer requirements,

reduction in ambiguities related to specification of orders, and

clarification of contract specifications and change management

processes. As well, the standard defines relationships with cus-

tomers not just in terms of the nature and content of interactions,

but also in terms of specific processesand touch points in the orga-

nization to facilitate this relationship. These include processes for

dealing with customer complaints and the promotion of greater

customer satisfaction. In summary, we hypothesize that the ISO

9000based relationships thatorganizations develop withtheir cus-

tomers will impact their internal organizational processes, as well

as operating performance. This is presented formally and with ref-

erence to Fig. 1 as:

H2a. The extent to which customer relationships are based on ISO

9000 principles is positively related to operating performance.

H2b. The extent to which customer relationships are based on ISO

9000 principles is positively related to the extent to which internal

processes are based on ISO 9000 principles.

2.4.3. Relationships with suppliers

ISO 9000 incorporates supplier relationships as one of its eight

principles, stating that “an organization and its suppliers are inter-

dependent and a mutually beneficial relationship enhances the

ability of both to create value” (ISO 9004, 2000, p. 5). Relating

to RDT, this statement clearly reflects the standard working as

“social–legal apparatus” (Pfeffer and Salancik, 1978, p. 2), facili-

tating and recognizing that all trading partners are part of “larger

social systems” (Pfeffer and Salancik, 1978, p. 193). In practice,

organizations frequently require suppliers to be ISO 9000 regis-

tered as an assurance that products or services supplied are of

consistent quality (Uzumeri, 1997; Hoyle, 1998). The standard pro-

videsa minimum quality assurancesystem (Clements,1993; Buttle,

1997). It requires an organizationto “select suppliersbasedon their

ability to supply product in accordance with the organization’s

requirements” (clause 7.4.1, Purchasing process, ISO 9001:2000).

It also stipulates that corrective actions be taken should mistakes

occur. Closer supplier relationships, and its consequent positive

impact on supply reliability, create greater certainty and stabil-

ity in many areas of an organization’s operations. The function of

the standard to alter the environment and create higher degree of

certainty regarding resource exchange is further illustrated. These

could include improved lead time prediction, waste reduction,

moreeffectiveschedulingof operationsand increasedproductivity.

In sum, we hypothesize that the ISO 9000 based relationships that

an organization develops with suppliers will impact internal orga-

nization processes, as well as operating performance. Presenting

this formally and with reference to Fig. 1:

H2c. The extent to which supplier relationships are based on ISO9000 principles is positively related to operating performance.

H2d. The extent to which supplier relationships are based on ISO

9000 principles is positively related to the extent to which internal

processes are based on ISO 9000 principles.

Organizations that are able to develop sound relationships with

suppliersare expected,on balance,to also beable todevelopsimilar

sound relationships with customers. Evidence for this proposition

is particularly strong in the supply chain management literature.

Studies supporting this proposition include: the identification of

the concept of “arcs of integration” whereby organizations that

integrate processes and systems with one say, suppliers are also

found to be pursuing similar levels of integration with customers

(Frohlich and Westbrook, 2001); the important role of “goal con-

gruence” in facilitating dealings with multiple trading partners

in a supply chain (Rossetti, 2008); and, recognition of the need

to connect and coordinate supply and demand as expressed in

the emerging concept of “demand chain management” ( Juttner,

2007). Conversely, organizations that struggle with one type of

stakeholder are expected to have similar difficulties with another.

Presenting this notion formally, it is hypothesized that:

H2e. There is a positive association between the relationships

with suppliers and relationships with customers for ISO 9000 reg-istered organization.

3. Research methods

3.1. Study participants

The empirical data to test the theoretical model and hypotheses

presented in the previous section was collected through a postal

survey targeting ISO 9000 registered organizations in the manu-

facturing industry in Australia. This industry was one of the first to

embrace the ISO 9000 standard on a large-scale basis during the

1980s and 1990s. As a result, it has relatively long experience and

accumulated knowledge of the standard.

Since ISO 9000 certificates are predominantly issued at theplant level, this level of analysis was chosen for this study. Corbett

et al. (2005) argue that the plant is the most suitable level for

such studies. The Joint Accreditation System-Australia and New

Zealand (JAS-ANZ) Register (Standards Australia, 2004) was used

for the purpose of selecting the sample of plants. This register is

a database of all plants registered to various standards, includ-

ing ISO 9000. The four-digit standard industrial classification code

for the manufacturing sector starts with ‘2’; plants falling in the

2000–2999 SIC range were targeted. An initial list of 1300 plants

was compiled. After checking to ensure that large companies did

not have multiple plants included in the sample, a final target

sample size of 1053 plants was obtained. The survey was car-

ried out in two waves. The first wave involved a mailout to the

whole sample. This was followed up by a repeat mailout to non-respondents a month later. The number of responses received was

418. Two of these had excessive missing data, and were excluded.

The final sample size was 416, representing a response rate

of 40%.

The database also provided names and contact details of

persons-in-charge of ISO 9000 registration in the organizations.

Thus, we used the key informant approach where the person in

charge of quality (quality/production/operations manager) was

selected to complete the questionnaire. This person is deemed to

be best to provide ISO 9000-related operational information at the

specific plant.

To assess bias in terms of sample representativeness of the

total population of manufacturing organizations, industry sub-

division comparisons weremade. Table1 showsthat the proportionof organizations in the country, JAS-ANZ Register, the sampling

frame and our sample are not significantly different in eight of

the ten sub-industry groups. Exceptions are the food, beverages

and tobacco categories where our sample seems to be under-

represented, and the metal products category where our sample

is a little over-presented. These differences are not large, and sug-

gest that the sample was likely to be free from significant bias, and

reasonably representative of manufacturing organizations in the

country.

As Table 1 shows, plants from our sample were mainly from the

metal products (26%) and machinery and equipment(9%) manufac-

turing industry sub-categories. Table 2 provides the profile of the

participating plants. The participating plants were predominantly

small plants with almost half having less than 100 employees and




Table 1

Assessment of extent of bias of sample based on industry sub-categories of the manufacturing organizations.

Manufacturing sector Proportion of manufacturing

organizations in the country in

2004–2005 (Australian Bureau

of Statistics, 2006), N = 131,183

(%)

Proportion of

plants listed in the

JAS-ANZ Register

(2004), N = 7418 (%)

Proportion of

plants in samplea,

N = 1053 (%)

Actual responding

plants N = 416 (%)

Food, beverage and tobacco 6.5 9 10 8

Textile, clothing, footwear and leather 11.5 3 3 4

Wood and paper product 7.5 5 8 2Printing, publishing and recorded media 11.9 6 8 5

Petroleum, coal, chemical and associated product 5.9 15 13 6

Non-metallic mineral product 4.3 10 9 2

Metal product 16.9 19 17 26

Machinery and equipment 20.2 30 26 9

Other manufacturing 15.2 2 6 30

More than one sector – – – 6

No response – – – 3

Total manufacturing 100 100 100 101b

a Some plants provided a number of ANZSIC codes, indicating that they were engaged in several types of activities. The descriptions of these plants were reviewed and

they were categorized based on their main manufacturing activity.b Total exceeds 100 due to rounding errors.

$A10million in annual revenue. Fiftyseven percent were registered

to the standard for less than 3 years.

3.2. Constructs development and measurement issues

Based on the review of the standards and related literature, sets

of items were developed to measure the four constructs shown in

Fig. 1. Specifically, the internal processes construct was measured

with nine items. The relationships with customers and relation-

ships with suppliers constructs were measured with six and five

items respectively while the endogenous construct, operating per-

formance, was measured with seven items. Summary descriptions

of these constructs are shown in Table 3, with the exact wordings

of the items as used in the measurement instrument presented in

Appendix 1.

Perceptual measures were used throughout for all items. While

use of this measurement type is relatively uncontroversial formanagement practices, this is not the case for performance.

Using managerial perceptions to measure performance can be

problematic due to the inherent subjectivity involved. However,

using direct objective measures is not without problems either.

Corbett et al. (2005), and Naveh and Marcus (2004) demonstrate

the difficulties of obtaining and using objective plant level data.

In favor of perceptual measures, Venkatraman and Ramanujam

(1986) show that senior executives’perceptions of their companies

performance correspond closely to objective measures. Further,

Meredith (1995) argues that the information compiled from the

perceptions of key participants is often better than limited col-

lections of incomplete objective data gathered independently by

researchers. On balance, we consider the perceptual measures of

operating performance to be adequate for the purpose of thisstudy.

Table 2

Demographic characteristics of plants participating in the study.

Characteristic Number

Plant size

Micro to small (less than 100 employees or less than

$Aus10m in revenue p.a.)

224

Medium to large (greater than 100 employees or greater

than $ Aus10m in revenue p.a.)

192

Time since registration to standard

Less than 3 years 239

Greater than 3 years 177

3.3. Data analysis procedure

Survey data of the type collected in this study can be ana-lyzed using either ‘exploratory’ or ‘confirmatory’ approaches

(Malhotra and Grover, 1998). Given that our study involves test-

ing pre-specified relationships between variables developed from

theory-based expectations on how and why variables were related,

the confirmatory approach was adopted. To test the hypothe-

sized relationships in the theoretical model (Fig. 1), we used the

structural equation modeling (SEM) multivariate technique. This

technique is ideally suited to our purpose for several reasons ( Hair

et al., 2006). First, SEM is able to estimate multiple and interrelated

dependence relationships. There are six such relationships shown

in Fig. 1. Second, SEM is able to represent unobserved concepts

in these relationships and account for measurement error in the

estimation process. Four such constructs are presented in Fig. 1.

Third, SEM is able to simultaneously and comprehensively assesstheentire setof relationships in a model. Fig. 1 has six relationships

which would benefit from simultaneous assessment.

Besides testing the theoretical model, SEM was also used to test

some of thepsychometric properties of theconstructs.We used the

AMOS® 5.0 software package, and utilized the maximum likelihood

(ML) estimation technique.

3.4. Data condition and psychometric properties of constructs

3.4.1. Distributional properties, outliers and missing data

The distributional properties of each variable were reviewed.

Nonnormality could lead to downwardly biased standard errors

that would result in an inflated number of statistically significant

parameters (Muthen and Kaplan, 1985; Byrne, 1994). All univari-ate statistics – mean, standard deviation, skewness and kurtosis

(Appendix 2) – suggested that there were no significant depar-

tures from normality based on thresholds suggested by Chou and

Bentler (1995). However, Mardia’s (1970) coefficient of multivari-

ate kurtosis was 143, which is above the threshold value of 10

(Oryand Mokhtarian, 2009), suggesting multivariatenonnormality.

However, a number of studies have shown that ML is reasonably

robust to multivariate nonnormality (Hu and Bentler, 1995; Ory

and Mokhtarian, 2009). As such, the departure from multivariate

normalitywas not regarded as a serious issue in our analysis. As for

outliers, since all variables were measured on a five-point Likert

scale, the dataset was carefully reviewed to ensure that there were

no data-entry related errors present. Also, Mahalanobis d-squared

distance measures didnot suggest that anyof thecaseswere signif-




Table 3

ISO 9000 key management practice and performance constructs.

Constructs Description of constructs Supporting literature

Internal processes ISO 9000 requires organizations to ensure that: the quality

assurance processes meet customer requirements; products

are checked against orders before delivery; equipment to

test/inspect products/processes are available;

products/processes are regularly tested/inspected; products

that cannot be tested are continuously monitored; everyone in

the organization is aware of what happens to products that failinspections; and, handling/storage/delivery methods minimize

quality-related problems

Tummala and Tang (1996), Johnson (1997),

Withers et al. (1997), Anderson et al. (1999),

Conti (1999), McAdam and McKeown (1999),

Naveh and Erez (2004) and Naveh and Marcus

(2005)

Relationships with customers ISO 9000 registered organizations: are aware of customer

requirements; have processes/activities that are designed to

increase customer satisfaction; have systems to avoid

misunderstandings about customer orders; systematically

review contracts; and have systematic processes for handling

complaints

Carr et al. (1997), Johnson (1997), Hoyle

(1998), Conti (1999), ISO 9001 (2000), Clause

7.2, Contract review process, Clause 4.3(a),

customer focus; Karapetrovic and Willborn

(2001), Terziovski et al. (2003) and Naveh et al.

(2004)

Relationships with suppliers The supplier-related issues that are relevant to ISO 9000 are:

organizations seek assurance of quality from suppliers;

suppliers are chosen on the basis of quality; there are minimal

misunderstandings about orders placed with suppliers; quality

of supplied products/services are assessed; materials from

customers and suppliers are all treated in the same way; and,

suppliers that are subcontractors are suited to the tasks they

perform.

Clements (1993), Buttle (1997), Hoyle (1998),

ISO 9001 (2000), Clause 7.4.1, Purchasing

process

Operating performance Some of the measures that indicate that an organization’s

outputs have consistent quality are steady levels of: costs

relating to quality of products; defective product rates; and,

product performance and reliability levels.

Venkatraman and Ramanujam (1986),

Williams et al. (1995), Gupta and Somers

(1996), Terziovski et al. (1997), Tan et al.

(1998), Terziovski et al. (2003), Naveh and

Marcus (2004) and Naveh et al. (2004)

icant multivariate outliers. Missing data, which averaged about 3%

per variable, were replaced with values estimated by the expecta-

tion maximization algorithm as this procedure does not introduce

bias (Hair et al., 2006).

3.4.2. Confirmatory Factor Analysis

Confirmatory Factor Analysis (CFA) was performed to assess

how well the items listed in Appendix 1 estimated the four con-

structs. The CFA model is a structural equation model where the

constructs are all co-varied with each other. The analysis showedthat five items had standardized factor loadings that were smaller

than 0.5 (IOP9, RC5, RC6, RS5 and OP6 in Appendix 1). This meant

that the prescribed constructs accounted for less that 25% of the

variances of these items. As is permissible for scales that are newly

developed (Hair et al., 2006), we decided to drop these five items.

CFA was performed again without the five items.

As in typical SEM analyses, a number of commonly reported

indices were obtained to assess the goodness-of-fit of models

with data. For our revised CFA model, these fit indices were

as follows: 2(df =203)

= 607 with p-value = 0.000; 2/df= 2.989;

goodness-of-fit index (GFI) = 0.880; adjusted goodness-of-fit index

(AGFI) = 0.850; Tucker–Lewis index (TLI) = 0.836; comparative fit

index (CFI) = 0.856; root mean square residual (RMR) = 0.032; and,

root mean square error of approximation (RMSEA) = 0.069.There is no simple way to decide how well these indices

describe goodness-of-fit. Bollen and Long (1993) and others have

proposed a graduated list of terms to describe model-data fit.

These include: ‘perfect’,‘strong’, ‘acceptable’, ‘adequate’, ‘marginal’,

‘weak’, ‘mediocre’, ‘poor’ and ‘no fit’. To decide how well the model

fits the data, the general recommendations are that the p-value

associated with 2 statistic should be greater than 0.05; GFI, AGFI,

TLI and CFI should be close to 1.0; and, RMR and RMSEA values

should be close to 0.0. In our CFA model, the 2 statistic p-value is

0.000, suggesting poor fit.However,this fit measure has a tendency

to produce negative results with samplesizes greater than 200, and

so was disregarded since our sample size was 416. The value for

2/df of 2.989 suggests acceptable fit,this being below the conven-

tional threshold value of 3.0 (Schermelleh-Engel et al., 2003; Hair

et al., 2006; Schreiber et al., 2006). As for other measures of fit, Hu

and Bentler (1999) have recommended to use conventional values

between 0.9 and 0.95 for indices such as GFI, AGFI, TLI and CFI; and

0.05–0.08 for RMR and RMSEA as cut-off values for acceptable fit.

If these cut-off criteria are applied to our CFA model results, we

would conclude that fit is good for RMR and RMSEA, but poor for

GFI, AGFI,TLI andCFI.However,the conventionalcut-off criteriaare

considered to be excessively stringent (Schermelleh-Engel et al.,

2003; Marsh et al., 2004; Sharma et al., 2005; Hair et al., 2006 ).

Less stringent cut-off criteria where factors such as model com-plexity, sample size and number of observed variables are taken

into account have been proposed by Sharma et al. (2005) and Hair

et al. (2006). For example, Sharma et al. (2005, pp. 941–942) sug-

gest that for datasets similar to ours, “more liberal” cut-off values

(e.g., 0.8) should be used for normed fit indices such as GFI and TLI.

Applying these criteria to our revised CFA model, we believe

that, overall, an adequate level of fit has been obtained. Our results

andfit assessment is similar tomany studies in theoperationsman-

agement area (Tan, 2001; Frohlich, 2002; Hult et al., 2002; Douglas

and Fredendall, 2004). For example, Hult et al. declared “moder-

ate but acceptable model fit” (2002, p. 581) based on CFI = 0.84,

AGFI= 0.86 and RMSR = 0.08. We used the items in the revised CFA

for all subsequent data analyses.

3.4.3. Face validity

The lists of ISO 9000 based management practices and oper-

ating performance items assigned to constructs were arrived at

through a review of the standard and research literature. This is

summarized in Section 3.2. Further, the measurement instrument

was scrutinized by eight experts in the area and pilot tested in 21

organizations. Thus, we believe that the constructs and their asso-

ciated items have good grounding in the standards and associated

literature, and therefore possess sufficient levels of face validity.

3.4.4. Multicollinearity

Pearson correlation coefficients between the 22 items are shown

in Appendix 2. If inter-item correlations are greater than 0.9, the

possibility that multicollinearity (i.e., the two items are essentially




Table 4

Summary of reliability and convergent validity tests.

Construct Number of items Cronbach’s alpha

reliability

coefficient

Construct

reliability

coefficient

Normed fit index

(NFI)

Non-normed fit

index (NNFI)

1. Internal processes 8 0.829 0.835 0.894 0.911

2. Relationships with customers 4 0.679 0.694 0.954 0.961

3. Relationships with suppliers 4 0.655 0.668 0.917 0.923

4. Operating performance 6 0.767 0.774 0.870 0.882

measuring thesame entity) existsis high (Hair et al., 2006). As none

of the correlation coefficients is greater than 0.9, multicollinearity

does not appear to be present.

3.4.5. Reliability

Two estimates of reliability were obtained – alpha reliability

coefficients (Cronbach, 1951) and construct reliability coefficients

(Hair et al., 2006, p. 777) for all four constructs. Table 4 shows that

the coefficients range from 0.655 to 0.835. These exceed the min-

imum threshold level of 0.6 for acceptable reliability for newly

developed constructs (Nunnally, 1978). Therefore, the selected

items reliably estimated the constructs.

3.4.6. Convergent and discriminant validityConvergent validity (i.e., items assigned to a construct con-

tribute roughly equally to the construct’s measurement) and

discriminant validity (i.e., items only estimate the construct to

which they are assigned and not any others) were both primarily

assessed using the CFA model testing approach. Having concluded

earlier that the revised CFA model generally had adequate empir-

ical support, we then carried out an assessment of the convergent

and discriminant validities.

The convergent validity of the constructs was generally sup-

portedby theestimated factorloadings ofitemson constructs. Allof

the standardized loadings were greater than 0.5,statistically signif-

icant (at p-values <0.001) and positive in sign. Another assessment

of convergent validity was obtained through SEM goodness-of-fit

measures called the normed fit index (NFI) and non-normed fitindex (NNFI) (Ahire et al., 1996) obtained from testing each con-

struct as a one-factor congeneric model ( Joreskog, 1971). These

fit indices measure the proportion of improvement of the over-

all fit of the theoretical model relative to a null model. Table 4

shows that the NFI ranged from 0.870 to 0.954 and for NNFI, from

0.882 to 0.961. These values suggest that the one-factor congeneric

models were significantly better than their respective null models,

thereby suggesting adequate levels of convergent validity for all of

the constructs.

Discriminant validity was tested in three separate ways. The

first method involved inspection of correlations between the con-

structs. From the CFAmodelresults shown in Table 5, itcanbeseen

that these correlations were mostly moderate,ranging from +0.629

to +0.790. According to Kline (2005, p. 60), if correlations betweenfactors in a CFA model are not excessively high (e.g., >0.90), then it

is unlikely that items assigned to one construct are loading signifi-

cantly highly on others. In our case, all the factor correlations were

well below 0.90, suggesting that all items were unidimensional

(i.e., items collectively estimated one single construct) and that

there was unlikely to be a problem associated with discriminant

validity. The second method for assessing discriminant validity

involved the examination of chi-squaredifference between all pairs

of constructs. Anderson and Gerbing (1988) suggesttestingtwo CFA

models foreach pair of constructs. The first model is where thecor-

relation coefficient is constrained to 1.0, and the second is free to

estimate.If thedifference in chi-square valuesbetween these mod-

els is significant,then bothconstructs possess discriminant validity.

As can be seen from Table 5, all chi-square differences were signif-

icant at p-value of 0.000. Therefore all constructs were distinct and

possessed discriminant validity. The third way in which discrimi-nant validity was assessed was by comparing the average variance

extracted (AVE) with the shared variance (i.e., square of the corre-

lation) between each pair of constructs. According to Fornell and

Larcker (1981), if the AVE values for both constructs that make up

thepair arehigher than theshared variance,then this indicatesthat

these constructs account fora greater proportion of thevariancesof

theitemsthat areassignedto them. Thevariances accountedby the

construct to which the items are not assigned are proportionately

less. Table 5 shows that most of theconstructs have AVEvalues that

are lower than the square of the correlation coefficients. It would

appear that according to this measure, the items do not provide

all the constructs with strong levels of discriminant validity. To

improve this measure of discriminant validity, we followed some

of the procedures suggested by Farrell (2009). This involved exam-ining the modification indices to see if there were any suggested

relationships for improving model-data fit. However, as none of

the suggested modifications for improved model-data fit could be

explained theoretically, no modification was implemented.

The first two methods provide evidence for discriminant valid-

ity whilst the third does not suggest strong support. This is not

uncommon, as studies have shown that it is possible to obtain

inconsistent outcomes depending on how discriminant validity

is measured (Farrell, 2009; Schriesheim and Cogliser, 2009; Shi

et al., 2009). For example, Shi et al. (2009) f ound in their study

that one of the four methods for testing discriminant validity did

not provide positive support. Similar to Shi et al. (2009), on bal-

ance, since two of the three tests were positive, we conclude

that the constructs have reasonable levels of discriminant validi-ties. Furthermore, we have interpreted the results of our study

cautiously.

Table 5

Results for discriminant validity tests.

Construct Percentage

variance

extracted

Correlation

coefficient

Chi-square difference and p-value for CFA models,

with correlation between constructs constrained to 1.0

and freely estimated

Construct Construct

1 2 3 4 1 2 3 4

1. Internal processes 38.9 1 –

2. Relationships with customers 36.7 0.703 1 71.1 ( p = 0) –

3. Relationships with suppliers 33.7 0.788 0.790 1 33.7 ( p = 0) 23.7 ( p = 0) –

4. Operating performance 36.6 0.616 0.629 0.696 1 214.7 ( p = 0) 105.5 ( p = 0) 65.3 ( p = 0) –




3.4.7. Nomological validity

The correlations between the constructs could be used to assess

nomological validity as they refer to the degree to which the

constructs make accurate predictions of other concepts in a the-

oretically based model (Hair et al., 2006). Table 5 indicates that

the correlations between exogenous and endogenous constructs

are at moderate levels. These provide nomological support for the

theory-based development of the hypotheses presented earlier.

3.4.8. Criterion-related validity

Criterion-related validityinvestigates the empiricalrelationship

between the scores on a test instrument (predictor) and an objec-

tive outcome (the criterion) (Flynn et al., 1990). As our instrument

used perceptual measures for organizational practices and oper-

ating performance, corresponding objective measures would be

required to evaluate this type of validity. To obtain objective data

proved to be difficult, with only three participating plants willing

to provide such data. Criterion-related validity of the measurement

items could not be established with certainty.

3.4.9. Common methods bias

Since all items were measured using five-point Likert scales

and responses were received from a single individual in the orga-

nization, there is a possibility that common methods bias could

be present. We performed Harmon’s one-factor test (Podsakoff et

al., 2003), using a confirmatory approach to test for this possibil-

ity. This involved testing a one-factor congeneric model, where

all 22 items were loaded onto a single ‘common factor’ con-

struct. The SEMresults of this test indicatedthat commonmethods

bias was unlikely to be present, with the goodness-of-fit indices

for this model indicating poor fit with data. The indices for

Harmon’s one-factor congeneric model were: 2(df =209)

= 904, p-

value= 0.000; 2/df= 4.327; GFI= 0.815; AGFI= 0.776; TLI= 0.727;

CFI = 0.753; RMR = 0.041; and, RMSEA= 0.090.

3.4.10. Non-response bias

Non-response bias was assessed by testing for differencesbetween respondents to the two waves of the survey (first-phase

respondent n1 = 236, second-phase n2 = 180). It was assumed that

organizations that responded in the second phase were reacting to

remindernotices sentto them, andthey wouldotherwise havebeen

non-respondents. Preliminary statistical analysis using t -tests of

responses between thetwo waves showedlittle difference. Further

assessment of non-response bias was made by subjecting the CFA

to a two-stage multigroup analysis (MGA) (Bollen, 1989; Joreskog,

1998;Rigdon etal.,1998), withthe groups beingfirst-phase respon-

dents and second-phase respondents. In the first stage of MGA, the

CFA model was tested in which all the parameters were freely esti-

mated in the presence of the two moderator groups. The second

step was to determine if the MGA showed a significant change in

fitwhen allthe parameters being influencedby themoderatorwere

constrainedto beequalacross thetwo groups. Ifa significant reduc-

tion in fit occurred,then this would suggest that themoderator was

acting. The first stage MGAfit was: 2(df =406)

= 876, p-value = 0.000;

andthe secondstage MGA was 2(df =416)

= 892, p-value= 0.000.The

inflationin 2 statisticis16with8degreesoffreedom,whichhasan

associated p-value of 0.042. Applyingthe conventional cut-off value

of 0.05, this indicates that same pattern of measurement relation-

ships exist for the two groups. Non-response bias did not appear to

be a problem when assessed with this method.

We also assessed non-response bias through telephone inter-

views with 20 randomly selected non-responding organizations.

The main cited reasons for non-response included: ‘lack of time’,

‘company policy of not disclosing information’ and ‘not inter-

ested’. None of these reasons suggested that these organizations

would have answered the questionnaire differently from respond-

ing organizations. The two approaches independently suggested

that non-response bias was low.

This section has shown that the constructs had been well

measured.Generally, theconstructs andtheiritems hadsoundpsy-

chometric properties, i.e., errors were within tolerable range and

levels of reliability and validity were higher than conventionally

acceptable in most cases.

4. Results

4.1. SEM results for theoretical model

As with the CFA model, we used the SEM analysis procedure

to assess the hypothesized relationships in the theoretical model

presented in Fig. 1. Fit indices for the hypothesized model were

the same as the revised CFA presented earlier since the number

of parameters to be estimated is exactly the same for the two

models. These fit indices are as follows: 2(df =203)

= 607 with p-

value= 0.000; 2/df= 2.989; GFI = 0.880; AGFI= 0.850; TLI = 0. 836;

CFI= 0.856;RMR = 0.032; and, RMSEA= 0.069. These indices suggest

thatthe theoretical model has adequate levelof empiricalsupport.1

4.2. Evaluation of theoretical model parameter estimates

Fig. 2 presents the structural model parameters within the

theoretical model. These are in standardized form(regression, rele-

vantsquared multiplecorrelation, and correlation coefficients). The

results have several noteworthy aspects. In terms of the magnitude

and sign of the relationships, only two relationship (H1 and H2a)

are statistically insignificant in magnitude, having p-values greater

than 0.05. All of the other relationships are statistically significant

in magnitude ( p-values less than 0.05 or 0.1) and positive in sign,

as hypothesized.

We further analyzed the regression and correlation data pre-

sentedin Fig. 2 by examining thestandardized effect sizes between

the constructs. Effect size is the increase/decrease in the endoge-

nous construct (in standard deviation units) when there is a onestandard deviation increase in the exogenous construct. Table 6

shows the standardized direct effects, indirect effects (calculated

using the path analysis tracing rules described by Kline, 2005, pp.

66–69) and total effects of all the exogenous constructs on the

endogenous constructs of the model. Table 6 indicates that while

some of the direct effects are relatively small, the indirect effects

are of significant magnitude such that when the direct and indi-

rect effects are added together, the total effect sizes in all cases are

moderate to strong in magnitude and positive in sign.

5. Discussion

5.1. Significance of results obtained

5.1.1. Hypothesized relationships within theoretical modelThe results in Fig. 2 show that H1 (the extent to which inter-

nal processes are based on ISO 9000 principles is positively related

to operating performance) is not supported. This relationship is

weak (standardized regression coefficient= +0.139, p-value greater

than 0.1). As such, we conclude that the internal organizational

processes basedon the prescriptions within the standard are statis-

tically insignificant predictors of plant operating performance. This

1 To further confirm this result, a 2 difference test can be used whereby the 2

value forthe hypothesizedmodelis comparedto CFAmodel (Andersonand Gerbing,

1988). However, in our case, the CFA and the hypothesized model had the same

numbers of parameters. Hence, this 2 difference test could not be meaningfully

performed.




Fig. 2. Theoretical model, showing maximum likelihoodestimates of standardizedregression coefficients (on straightlines single-arrowheads),squaredmultiplecorrelation

coefficients (on constructs) and correlation coefficients (on curved lines with double-arrowheads).

0.05< p-value≤0.1; **0.01 < p-value≤0.05; *** p-value≤0.01.

lack of direct relationship can be explained by the limited range

of benefits that ISO 9000 of itself is able to generate for organi-

zations. While ISO 9000 based procedures ensure that processes

are constantly monitored and measured, and that remedial actions

and early interventions are taken to reduce defect rates, Naveh and

Marcus (2004, 2005) and Naveh et al. (2004) showed that other

organizational interventions are required in conjunction with ISO

9000 practices to produce substantial improvements in operating

performance. As an extension of these studies, we are proposing in

this paper that the real value of ISO 9000 lies not in the intrinsic

direct benefit that it may deliver, but in the mechanism it providesto facilitate resource exchange between trading partners, bound-

ary spanning, legitimacy and the capability to adapt. As such, our

result for H1 is not surprising, and points toward the validity of

RDT as an explanation of the role that ISO 9000 plays within the

organization. Further, this result supports the view that the stan-

dard is a ‘minimalist’ approach to quality, an early stage of the

quality management maturity model (Conti, 1999; Conti, 2004).

Similar to Corbett et al.’s (2005) interpretation, the standard could

be regarded as, using Hill’s (2000) terminology, an ‘order quali-

fier’ rather than an ‘order winner’. Finally, there is doubt as to the

extentto which internal processes that are based on ISO 9000 prin-

ciples can affect operating performance. Several studies show a

non-significant relationship between ISO 9000 adoption and oper-

ating performance (Terziovski et al., 1997; Simmons and White,1999; Lima et al., 2000). Our result for H1 is similar to those in

these studies.

For H2a (the extent to which customer relationships arebased on

ISO 9000 principles is positively related to operating performance),

the results show that this direct effect is not significant (standard-

ized regression coefficient = +0.139, p-value greater than 0.1). As

for H2b (the extent to which customer relationships are based on

ISO 9000 principles is positively related to the extent to which

internal processes are based on ISO 9000 principles), the effect is

significant, but the strength of the relationship is moderate (stan-

dardized regression coefficient = +0.212, p-value between 0.05 and

0.01). As H1 is not supported, therefore, both the direct (H2a) path

and the mediated indirect (H2b→H1) path between relationshipswith customers on operating performance do not have strong sup-

port. We conclude that the customer relationship aspects of the

standardare notsignificantly effectualin generatingoperatinglevel

performance improvements. This outcome is consistent with sev-

eral studies in the literature. For example, Rahman (2001) and Carr

et al. (1997) f ound that organizations without ISO 9000 registra-

tion were better at ‘customer management’ and ‘customer focus’

practices than registered organizations.

This outcome could be explained in a couple of ways. First, the

scope of customer-related practices embodied within the standard

might be rather limited. In essence, the standard requires orga-

nizations to develop procedures and systems such that errors in

communication with customers are minimized. This is important,

but may not be adequate to cover all aspects of an organization’srelationships with its customers. Naveh and Erez (2004), Yeung

(2008) and Sila (2007) suggest that other quality improvement

Table 6

Effects decomposition of paths in the hypothesized model.

Exogenous construct: Direct effect Indirect effect Total effect

Endogenous construct: internal processes

Relationships with customers 0.212 0.490 0.702

Relationships with suppliers 0.620 0.167 0.787

Endogenous construct: operating performance

Relationships with customers 0.182 0.447 0.629

Relationships with suppliers 0.443 0.253 0.696

Internal processes 0.139 – 0.139




practices need to be instituted to realize full customer-related

benefits of the standard. It appears that the benefits of ISO 9000

are limited to being customer ‘satisficing’, and the standard is

some way from being an instrument that enables organizations to

achieve Kano’s (1984) concept of ‘delighting the customer’.Second,

RDT predicts that despite the best efforts of focal organizations,

customers may not necessarily engage proactively in a recipro-

cal manner if it is to their advantage. Customers can withhold

vital information, act opportunistically, and keep their suppliers at

arms-length if it suits their purpose. There is a possibility that this

could be the case in this study. Our study participants are all from

the manufacturing sector, with the majority from the machinery,

equipment and metal working sub-sectors. Market concentration

in these sectors is low, and there are lots of suppliers with small

market shares. Combined with the fact that most of the plants

in this study are micro, small or medium in size, it is likely that

they are subjected to the exploitative behavior on their customers’

part given their economic dependence on them, as predicted by

RDT. Within this context, ISO 9000 may not be a powerful enough

tool to overcome the opportunistic behavior of customers. Fur-

ther, customer relationships (as currently defined by the ISO 9000

standard) create a resource of value to the customer that may not

be easily reflected in the operating performance of the organiza-

tion. The creation of legitimacy, for example, may have value inthe eyes of the customer that may not be reflected in operating

performance.

Hypotheses H2c (the extent to which supplier relationships are

based on ISO 9000 principles is positively related to operating

performance) and H2d (the extent to which supplier relationships

are based on ISO 9000 principles is positively related to the

extent to which internal processes are based on ISO 9000 princi-

ples) are partially supported. The direct effect predicted in H2c

is supported (standardized regression coefficient = +0.443, p-value

between 0.01 and 0.05). Also supported is H2d (standardized

regression coefficient= +0.620, p-value less than 0.01). However,

since the magnitude of the relationship in H1 is not strong, the full

indirect effect (H2d→H1) in the partially mediated model is not

strongly supported.The strengths of the paths emanating from relationships with

suppliers (H2c and H2d) were as expected, as the standard has

been historically strongly focused on suppliers to focal organiza-

tions. The standard prescribes many practices relating to suppliers.

Evidently, many focal organizations areable to do these reasonably

easily, e.g., seek quality inspection data from suppliers. From a RDT

perspective, the results suggest that ISO 9000 is able to assist focal

organizations to effectively manage their relationships with sup-

pliers. This is opposite to the findings on the utility of the standard

with respect to customers, and again may reflect ISO 9000 as an

“apparatus” or platform for controlling relationships with suppli-

ers, and for promoting stability. This result provides evidence to

suggest that the standard plays an important boundary spanning

role in promotingcontrol, and by implication providing a capabilityto adapt.

For hypothesis H2e (there is a positive association between the

relationships with suppliers and relationships with customers for

ISO 9000 registered organization), there is strong support (corre-

lation coefficient= +0.790, p-value less than 0.01). This shows that

organizations with strong relationships with customers have sim-

ilarly strong relationships with their suppliers. The converse also

applies. This inter-correlation also suggests thatthe two exogenous

constructs have a collective effect on the endogenous constructs in

the model.

The strong inter-relationship can be explained in terms of capa-

bilities andresourcesof organizations.Notwithstanding our finding

that ISO 9000 based customer-related aspects could be ineffectual,

the capabilities that are probably required to develop close rela-

tionships with one stakeholder group would be similar for other

stakeholder groups. Similarly, if an organization has resources to

invest in developing relationships with customers, on balance, it

would do the same with suppliers.

Whileinsights can be drawnfrom examining individualhypoth-

esized relationships, collective evaluation of all the relationships in

the theoretical model can provide additional, deeper insights. The

effects analysis presented in Table 6 is instructive for this purpose.

Table 6 shows that the indirect effects of both task environment

constructs are positive in sign and moderate to large in magnitude.

The total effects of the two constructs on operating performance

are very similar (0.629 and 0.696 for relationships with customers

andrelationships with suppliersrespectively). As such, it is evident

that thetask environment constructs actthrough each other.If they

are considered in isolation (as has been done in the section above),

their full impact would have been severely underestimated. This

is so for both relationships with customers and relationships with

suppliers.The results showthat the direct andimmediate impact on

operating performance is relatively weak, leading us to tentatively

conclude that these aspects of thestandardare notparticularlywell

developed and specified, and couldbe relativelydifficultfor organi-

zations to implement well. However, when the sum total of all the

indirect effects areconsidered,it is evident that both customer-and

supplier-related aspects make a strong and positive contribution tooperating performance.

5.2. Implications for theory

Researchers have used different theoretical lenses to under-

stand the motivations, processes, contexts and aspirations of

organizations that register to standards such as ISO 9000. These

include: critical theory (Boiral, 2003); agency theory (Adams,

1999); institutional and organizational learning theories (Naveh

et al., 2004); neo-institutional and social network theories (Guler

et al., 2002); innovation adoption, diffusion and implementation

theories (Naveh and Marcus, 2004, 2005); and, technology coher-

ence theory(Bennerand Veloso, 2008). Allof these theories provide

rich insights into the phenomenon, but by themselves and inisolation, they do not provide a complete picture. In particular,

each of these theories does not account for substantial enough

proportions of variance in effectiveness of the standard, suggest-

ing that there is scope for examination using other theoretical

perspectives.

In this paper, we provide a more comprehensive theoretical

basis for the dual functionality of ISO 9000 that could account

for its widespread registration. To our knowledge, RDT has not

been used before to explain the popular registration and opera-

tion of the ISO 9000 standard. Specifically, we have shown that

RDT is a useful theory to understandthe organization–environment

boundary spanning aspects of the standard. In essence, RDT pre-

dicts that organizations act in ways that would enable them to

acquire resources from their stakeholders present in their envi-ronment. From our findings, we propose that ISO 9000 is a useful

facilitative instrument for resource acquisition, control of relation-

ships with trading partners, boundary spanning, and for building

adaptive capabilities. As such, we have contributed a more rigorous

theoretical perspective towards the understanding of the standard.

Together with the theories listed above, a rich tapestry of insights

into the standard is emerging, which leads to a more holistic and

integrated understanding into this popular phenomenon.

In applying RDT to the ISO 9000 context, two contributions to

RDT have been made. First, we have shown that this theory can

be successfully applied to a new context, thereby demonstrating a

new domain of application. Here, we have addressed the call made

by Pfeffer (2005) that RDT (like other theories) needs continued

invocation for it to remain relevant. Second, we have improved the




resolutionof the theory’sapplication. RDT is generallysilent on spe-

cific tools andmethodsthatorganizations canuse fortheirresource

acquisitions purposes, with previous empirical studies focusing on

macro-level actions such as mergers and acquisitions (Finkelstein,

1997) and strategic alliances (Gulati and Gargiulo, 1999). This has

been a sourceof frustration forsome(Barringer and Harrison, 2000;

Pfeffer, 2005). Inthisstudy, wehaveshown thatRDT can beapplied

to explain a management tool that operates at a micro-level. In

doing so, we have shown that RDT can be invoked at a fairly base

operational level. We have shown that RDT can be used to analyze

reasonably fine-grained phenomena.

5.3. Implications for practice

Our results suggest that managers must be careful when evalu-

atingtheutilityvalueofthestandard.IfmanagersevaluateISO9000

on its direct and immediate impact on bottom line performance,

then the standard could be considered as being ineffectual. Our

results show that the impact of internal organizational processes

that are based on ISO 9000 principles on operating performance is

not significant.Likewise, the customer and,to someextent, supplier

relationship aspects of the standard do not significantly impact

operating performance. If managers view these in isolation, theycould conclude that the standard is not all that useful, and decide

to discontinue their registration status. In plants where registra-

tion is being considered, they may even decide to stop the process.

We recommend that managers adopt a more holistic, integrated

perspective of the standard. The effects analysis (Table 6) indicates

that differentelementsof thestandardwork through indirect path-

ways. Thus, managers should view the standard as a total package,

with some parts that are strong and others that play supporting

roles. When a holistic and integrated view is taken, the consequent

benefits in improvements to operating performance will become

more apparent.

At the detailed level of application, our results show that the

standard can enable organizations to develop procedures for stable

internal processes as well as better coordination with customers

and suppliers. As such, the standard can be regarded as robust and

proven pre-packaged toolthat relieves managers from creating and

implementing these processes and systems from scratch.

6. Conclusions and future research

This study attempts to provide a stronger theoretical basis for

the registration and operation of the ISO 900standard. As the stan-

dard focuses on internal processes and coordination with external

stakeholders, we invoked RDT to explain the dual function of the

standard. Our model and results suggest that RDT presents an

appropriate organization–environment boundary spanning per-

spective of how the standard operates. Similar to that in Sroufe

and Curkivoc (2008), our results suggest that ISO 9000 is a toolthat organizations use for managing issues in their organizational

environment.

This study has several limitations that could be opportunities

for future research. First, this study is based on an empirical set-

ting consisting of mostly microand smallAustralian manufacturing

plants that are registered to the standard. Whilst it is possible to

generalize the findings of this study to a greater population of Aus-

tralian manufacturing companies, we are unable to establish if our

findings can find applicability in other countries, industries, and

organization sizes. Future studies could take a wider domain to

improve generalizability of the results. Second, perceptual mea-

sures were used for all variables. Whilst strong justifications for

this approach was provided, and a common methods test showed

that bias was unlikely to be present, nonetheless, objective perfor-

mance measures might provide fresh insights and interpretations.

Future studies could thus examine these types of measures. Third,

the effects of general business environmental conditions were not

assessed. Future studies could examine the moderating influence

of general business environmental conditions (along with others)

on the effectiveness of the standard. Fourth, the study is based

on monadic data obtained from focal organizations. While this

is acceptable as the study sought to understand the actions and

behaviorsof focalorganizations, future studies couldadopt a triadic

methodological stance whereby the external actions of the focal

organization would be externally validated, thus providing richer

insights. Fifth,the SEM goodness-of-fit indices for the hypothesized

model, while suggesting adequate fit, could be improved upon.

Future studies could attempt to improve measurement of con-

structs. Finally, the ISO has developed many other standards over

time. Some are quality management standards customized to the

needs of specific industry sectors (e.g., ISO/TS 16949:2002 for the

automotive industry),while others are structurally modeled on ISO

9000, but address other functional areas (e.g., ISO 14000 environ-

mental systems standard). Future studies could examine these ISO

9000 variant standards and test the applicability of our findings to

the larger standard set. The proposed future studies would address

the robustness of the findings of the current study.

Appendix 1. Constructs and associated items2

(1) Internal processesIOP1: The quality assurance processes ensure that the organization’s own

output requirements are consistently metIOP2: The actual manufactured products are checked against customer

orders before they are deliveredIOP3: The equipment to carry out tests and inspections are available when

neededIOP4: Products and processes are inspected and/or testedIOP5: Processes that produce products that cannot be tested or inspected are

continuously monitoredIOP6: Everyone is aware of what needs to be done with raw materials,

work-in-progress and finished products that fail inspectionsIOP7: The handling, storage, packaging and delivery methods help to

minimize quality-related problemsIOP8: It is possible to identify clearly when a raw material, work-in-progress

or finished product has been inspectedIOP9a: It is possible to establish relevant details (such as parts suppliers, place

and date of manufacture, persons-in-charge) of all finished products

(2) Relationships with customersRC1: The organization is aware of the requirements of its customersRC2: Processes and activities of the organization are designed to increase

customer satisfaction levelsRC3: Misunderstandings between customers and the organization about

customer orders are rareRC4: All contracts are systematically reviewed before acceptance, even if

they are routine onesRC5a: The organization has systematic processes for handling complaintsRC6a: Changes made to contracts lead to confusion in the organization

(reverse coded)

(3) Relationships with suppliersRS1: The organization seeks assurance of quality from suppliersRS2: The main criterionfor choosingsuppliers is thequalityof their productsRS3: Misunderstandings between suppliers and the organization about

orders placed with them are rareRS4: The quality of supplied products and services are assessedRS5a: Materials provided by the customer for incorporation into products are

treated the same as materials from any other suppliers

(4) Operating performanceOP1: Inventory levelsOP2: Defective products rateOP3: Product reliability performanceOP4: Total lead time of manufacturing productsOP5: Delivery performanceOP6a: Capacity utilization ratesOP7: Wastag e

a These itemswereremoved from thefinalversionof theconstructsand notused

in the testing of the revised CFA and hypothesized models.

2 Foritemsofconstructs1,2and3,surveyrespondentswereaskedtoexpresstheir

agreement withstatementson a fivepointscale,with 1 representing‘strongly agree’

and 5 representing ‘strongly disagree’. For items of construct 4, survey respondents

were asked to express the satisfaction of the organizations with various measures

of performance using a five point scale, with 1 representing ‘very satisfactory’ and

5 representing ‘very dissatisfactory’.






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A Resource Dependence Theory Perspective of ISO 9000

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