IMPACT OF QUALITY COST MANAGEMENT AND QUALITY MANAGEMENT ON FIRM PERFORMANCE: EVIDENCE FROM CHINA

Quality cost management has a positive impact on enterprise performance, through strengthening quality management for products and services. In the process of quality cost management, increasing the prevention cost and inspection cost (preventive input) for quality can effectively reduce both internal and external quality losses, and contribute to a reduction in the total cost of quality and an increase in the profitability. Such a relationship between quality cost management and firm performance is conceptually accepted but few empirical evidence is available in the literature. Therefore we aim to empirically investigate the positive impact of quality cost management on quality management and firm performance in the context of business practice in China. By taking a questionnaire survey with a sample of enterprises in different regions across China, we perform regression analysis to evaluate the important relationships among quality cost management, quality management and firm performance.  The results show that the preventive quality control and input are positively correlated to the efficiency of quality management. Furthermore, quality management and quality cost management are positively associated with firms’ operating performance. We therefore draw out some recommendations on strengthening quality cost management and quality management.