TQM Practice in Maquiladora - Antecedents of Employee Satisfaction and Loyalty - 2006

Journal of Operations Management 24 (2006) 791812
www.elsevier.com/locate/jom
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, USA
b
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 Mexicosee Balasubramanian and Padhi
* Corresponding author. Tel.: +1 505 646 4987;

fax: +1 505 646 1372.
E-mail addresses: minjun@nmsu.edu (M. Jun),
alan.cai@lakeheadu.ca (S. Cai), hojung_shin@korea.ac.kr (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 manufacturing 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 todays 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 firms 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
792
M. Jun et al. / Journal of Operations Management 24 (2006) 791812
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 organizational 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 isomorphismthe 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 implement 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:
If 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 satisfaction and loyalty, and in turn alleviate HR problems
while improving its TQM implementation efforts?
If 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 management perspective with an objective of identifying key
TQM practices that significantly contribute to organizational 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 associations 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
to compare quality performance levels of typical

maquiladora firms. Rather, we specifically investigate
the perceptions of employees at two leading maquiladora 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.
793
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 contribution, limitations, and the direction of future research.
2. The literature and research hypothesis
2.1. Institutional theory and TQM universality
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 Mexicos main
source of foreign exchange and represents about 55%
of the countrys manufacturing exports and 9% of
Mexicos 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
Organizational behavior theorists have acknowledged that when an organization becomes institutionalized 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 isomorphism. 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 contributes 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. Proponents 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,
794
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 researchers believe that a firms success with TQM is contingent
upon the fit among the firms 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 comprehensive view of TQMTQM 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 satisfaction 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
companys business objectives and execute the corresponding 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 infrastructure practices which comprise the environment
that supports effective use of the core quality management 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 HRfocused 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).
Table 1
Comparison of TQM practices identified by the major studies and the present study
Key driver
Anderson et al. (1995)
Flynn et al. (1995)
Ahire et al. (1996)
Black and Porter (1996)
Present Study
Top management
leadership
Role of quality
department
Visionary leadership
Top management
support
Top management
commitment
Corporate quality culture
Top management
commitment
Quality performance
Customer satisfaction
Competitive advantage
Product quality
Improvement of
quality systems
Employee
satisfaction
and loyalty
Employee relations
Learning
Workforce management
Employee training
Training
Employee fulfillment
Work attitudes
Employee
empowerment
Employee
involvement
Teamwork structures
for improvement
External interface
management
People and customer
management
Employee
empowerment
Employee training
Strategic quality
management
Customer satisfaction
Human resourcefocused TQM
Internal and external

cooperation
Teamwork
Appraisal system
Employee
compensation
Others
Process management
Process management
Product and
service design
Supplier quality
management
Quality data reporting
Continuous improvement
Process flow
management
Statistical control/
feedback
Product design process
Supplier relationship
Customer relationship
Statistical
process control
Design quality
management
Supplier quality
management
Product and
internal quality
Benchmarking
Customer focus
Supplier partnerships
Operational quality planning
Quality improvement
measurement systems
Communication of
improvement information
Customer satisfaction orientation
Dependent variable
Saraph et al. (1989)
795
796
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 endorsement 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 maquiladora 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 justification 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 manufacturing 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, empowerment in India was negatively correlated with work
satisfaction. In this context, whether employee empowerment programs would have a positive influence on
maquiladora workers satisfaction is a net empirical question, 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 investment 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
797
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 recognition 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 TQMoriented 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
798
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 positive 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 maquiladora companies.
2.3.4. Training as a mediator between top
management commitment and TQM variables
Given that the constructs associated with HRfocused TQM practices are implemented simultaneously, 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 employees 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). Therefore, we surmise that the positive impact of the
commitment of top management on employee empowerment 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 (Teagarden 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 abbreviations 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 g 1 TM z1
(1)
ET g 2 TM z2
(2)
TW g 3 TM z3
(3)
AS g 4 TM z4
(4)
EC g 5 TM z5
(5)
ES b61 EE b62 ET b63 TW b64 AS

b65 EC z6
EL b7 ES z7
(6)
(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 g 1 TM b1 ET z1
(8)
TW g 3 TM b3 ET 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 surveys 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 measuring 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
799
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 SpanishEnglish 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
ones 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 crosssectional survey approach, in which questionnaires are
mailed to one or more respondents of the sample
companies (Ketokivi and Schroeder, 2004; Rungtusanatham et al., 2005). Although the conventional mailsurvey 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 industrywide practice among the maquiladoras in Mexico
800
(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 environment. 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 maquiladora 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 companies 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
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 worlds
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
Table 2
Profiles of the survey respondents
Profile
Number of respondents
Category
Count
Proportion (%)
Gender
407
Male
Female
158
249
38.8
61.2
Age
396
20 or less
2125
2630
3135
3640
4150
50 or more
63
102
100
64
32
26
9
15.9
25.8
25.3
16.2
8.1
6.6
2.3
Education
396
<Elementary
Elementary
Middle school
Technical school
High school
Some college
College
15
106
119
44
44
26
42
3.8
26.8
30.1
11.1
11.1
6.6
10.6
Experience with current type of job

(including other companies)
395
Less than 1 year

13 years
35 years
57 years
7 or more years
71
119
88
49
68
18.0
30.1
22.3
12.4
17.2
Employment period at the current company
397
Less than 6 months

612 months
12 years
24 years
4 or more years
64
28
81
91
133
16.1
7.1
20.4
22.9
33.5
Type of work
396
Quality control
Production
Administration
Engineering
Others
52
218
33
23
70
13.1
55.1
8.3
5.8
17.7
company is one of the worlds 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 Spanishspeaking 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 welldiversified, 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
801
(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 employees61% 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, depending on the employees 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 misspecification, 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
802
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
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). Consequently, the 10 items were deleted from the measurement 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, Cronbachs alphas and composite reliability
indices were examined. As shown in Table 3, most of
the constructs have a Cronbachs 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
Table 3
The measurement model statistics
Construct
Indicator
Standardized
loading
Measurement
error variance
AVEa
Cronbachs
alpha
Composite
reliability
Top management commitment
TM1
TM2
TM3
0.666
0.887
0.776
0.556
0.213
0.397
0.612
0.826
0.824
Employee empowerment
EE2
EE4
0.749
0.770
0.439
0.407
0.576
0.723
0.731
Employee training
ET1
ET2
ET3
0.687
0.663
0.789
0.528
0.560
0.377
0.511
0.760
0.757
Teamwork
TW1
TW2
0.661
0.645
0.563
0.583
0.427
0.610
0.598
Appraisal systems
AS1
AS3
0.656
0.822
0.569
0.324
0.553
0.679
0.709
Employee compensation
EC1
EC2
0.877
0.784
0.230
0.385
0.692
0.808
0.817
Employee satisfaction
ES1
ES3
ES4
0.716
0.856
0.675
0.487
0.267
0.544
0.567
0.772
0.795
Employee loyalty
EL1
EL2
EL3
EL4
0.524
0.675
0.805
0.798
0.725
0.544
0.351
0.363
0.504
0.792
0.798
AVE represents average variance extracted.
803
Table 4
Measures of the model fit
Desirable range
2
x -Test statistic
x2-Test statistic/d.f.
Root mean square error of approximation (RMSEA)
RMSEA 90% confidence interval
BentlerBonett normed fit index (NFI)
BentlerBonett non-normed fit index (NNFI)
Comparative fit index (CFI)
Goodness of fit index (GFI)
Degrees of freedom (d.f.)
3.00
0.08
0.90
0.90
0.90
0.80
Measurement model
Structural Model A
Structural Model B
336.068
2.100
0.059
0.0500.067
0.887
0.916
0.936
0.910
160.000
357.552
2.008
0.056
0.0480.064
0.939
0.962
0.968
0.884
178.000
314.667
1.787
0.050
0.0400.058
0.946
0.971
0.975
0.897
176.000
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.
(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 measurement models 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
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 constructs 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
Table 5
Construct correlations and discriminant validity
Constructs
TM
EE
ET
TW
AS
EC
ES
EL
Top management commitment (TM)

Employee empowerment (EE)
Employee training (ET)
Teamwork (TW)
Appraisal systems (AS)
Employee compensation (EC)
Employ satisfaction (ES)
Employee loyalty (EL)
0.782
0.501
0.577
0.300
0.419
0.397
0.453
0.368
0.759
0.594
0.248
0.343
0.338
0.534
0.354
0.715
0.308
0.383
0.356
0.471
0.314
0.653
0.253
0.208
0.327
0.319
0.744
0.260
0.311
0.419
0.832
0.408
0.255
0.753
0.547
0.709
The diagonal elements in bold are the square roots of the average variance extracted. The offdiagonal elements are the correlations between
constructs. For discriminant validity, the diagonal elements should be larger than any other corresponding row or column entry. All the correlation
coefficients were significant at p < 0.01 level.
804
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. Therefore, the measurement model was deemed acceptable.
enhancing employee satisfaction. As illustrated in

Fig. 2, among the five TQM practices under investigation, 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).
4.3. Structural Model Awithout the mediation

effect of employee training
4.4. Structural Model Bwith 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 literatures 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
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,
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; [ ] error variance of each endogenous constructs.
805
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 difference 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 empowerment (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),
806
Table 6
Summary of the hypothesis test results based on structural Model B
Association
Hypothesis
Causal path
Top management commitment and TQM practice
H1a
H1b
H1c
H1d
H1e
TM ! EE
TM ! ET
TM ! TW
TM ! AS
TM ! EC
TQM practice and employee satisfaction
H2
H3
H4
H5
H6
EE ! ES
ET ! ES
TW ! ES
AS ! ES
EC ! ES
Employee satisfaction and employee loyalty
H7
ES ! EL
Mediation effect of training
H8
H9
ET ! EE
ET ! TW
Path coefficients
t-Value
Hypothesis supported
0.229
0.683
0.159
0.570
0.484
2.243
7.443b
1.232
5.594b
6.292b
Yes
Yes
No
Yes
Yes
0.493
0.083
0.259
0.134
0.208
3.511b
0.587
2.724b
1.825
3.032b
Yes
No
Yes
No
Yes
0.788
6.823b
Yes
0.602
0.369
Yes
Yes
5.097
2.663b
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). Therefore, Hypotheses H1a and H1cH1e 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 supported. 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
overall employee satisfaction levels and in turn lessen

epidemic HR problems.
Among the TQM practices investigated, empowerment, teamwork, and employee compensation have a
positive influence on maquiladora employees work
satisfaction. The strongest influence on employee
satisfaction stems from employee empowerment.
Top management commitment has demonstrated a
significant impact on the effectiveness of employee
empowerment, employee training, appraisal systems,
and employee compensation, but not on teamwork.
Employee training significantly affects the effectiveness 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.
In general, maquiladora management must place its
priority on employee training and employee empowerment to enhance employee satisfaction. In particular, employee satisfaction can be significantly
influenced by the level of employee training, which
contributes significantly to facilitating employee
empowerment and teamworkthe two most important factors for employee satisfaction.
The major findings and their managerial implications

can be summarized as follows:
5.1. Satisfied employees are loyal
Maquiladora employees satisfaction significantly

affects their loyalty to the companies. Thus, it may
be necessary for maquiladora managers to enhance
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
807
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 satisfaction can be largely dependent upon the managements 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 maintained 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 (especially high employee turnover rates) in maquiladora
firms can be alleviated by placing management
emphasis on employee satisfaction within the TQM
framework.
factor for employee satisfaction is employee empowerment, followed by teamwork and employee compensation, 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 meaningful 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 management (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.
5.2. Let maquiladora workers be empowered
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
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
5.3. Focus on training to synergize employee

satisfaction
808
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 empowerment 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 institutional theory. Although the present study limited its
scope to HR-focused TQM practices, the hypothesistest 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 maquiladoras. In other words, TQM as a holistic management
philosophy is applicable across countries.
Moreover, the finding that top management commitment 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 jobor 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 cultural 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 HRfocused 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, lowemployee 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 combined with both individual and team-oriented performance 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 teamworktwo 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
809
be some commonality among all the offshore manufacturing 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 crosssectional 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
studys model.
Appendix A
Please indicate your experience and perception on each statement, using the following scales: 1, strongly disagree;
2, disagree; 3, neutral; 4, agree; 5, strongly agree.
Top management commitment (TM)
TM1
Top management views quality as being more important than cost
TM2
Top management allocates adequate resources toward efforts to improve quality
TM3
Top management is visibly and explicitly committed to quality
Employee empowerment (EE)
EE1
I am provided with substantial autonomy and responsibility
EE2
I am encouraged to develop new ways to provide better products and services
EE3
I am not punished for quality improvement ideas that are unsuccessful
EE4
I am provided with sufficient information to arrive at good quality suggestions
Employee training (ET)
ET1
I have received sufficient training at this firm to do my job effectively
ET2
I am trained in quality improvement skills
ET3
Much of the training at our facility emphasizes product and service quality
ET4
I am trained in group-discussion and communication techniques
Teamwork (TW)
TW1
Teams are used extensively at this firm
TW2
Product and service quality teams are formed for the long run
TW3
I think that my teams are effective in producing quality goods and services
Appraisal systems (AS)
AS1
The quality of my work is an important factor in evaluating my job performance
AS2
I am regularly given feedback on my job performance
AS3
Part of my job performance evaluation is based on how well I work with teams
AS4
Part of my job performance evaluation is based on customer feedback on product and service quality
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
810
Appendix A (Continued )
EC4
EC5
I will receive a reward if I do something to improve product and service quality

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
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TQM Practice in Maquiladora - Antecedents of Employee Satisfaction and Loyalty - 2006

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Journal of Operations Management 24 (2006) 791812

TQM practice in maquiladora: Antecedents

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

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

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

challenges encountered by MNCs while transferring the

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

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

to compare quality performance levels of typical

research, the conceptual foundation of the empirical

1.2. The Mexican maquiladora

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

organizations implementing TQM are perceived as

Anderson et al. (1995)

Flynn et al. (1995)

Ahire et al. (1996)

Black and Porter (1996)

Corporate quality culture

Internal and external

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

Saraph et al. (1989)

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

Fig. 1. Schematic illustration of the conceptual model.

Top management commitment may be even more

H1e. Top management commitment has a positive

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

and two prior studies (Harrison and Hubbard, 1998;

Australia and New Zealand that the use of teams has a

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

consist of financial and non-financial rewards for

somewhat correlated. The possible correlations among

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

commitment (TM), employee empowerment (EE),

ES b61 EE b62 ET b63 TW b64 AS

In Model B, the mediation effects of employee

These alternative structural Models A and B will be

in implementing TQM initiatives in their plants, and

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

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

the common stereotype against the maquiladora

Experience with current type of job

Less than 1 year

Employment period at the current company

Less than 6 months

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

company is one of the worlds largest automotive

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

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

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

unacceptably low factor loadings less than 0.5, large

Top management commitment

AVE represents average variance extracted.

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

than 0.08 a reasonable fit. The RMSEA of the

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

4.2. Discriminant validity of the measurement

Top management commitment (TM)

M. Jun et al. / Journal of Operations Management 24 (2006) 791812

between two constructs. All the diagonal elements are

enhancing employee satisfaction. As illustrated in

4.3. Structural Model Awithout the mediation

4.4. Structural Model Bwith the mediation effect

The overall fit statistics for Model A are reported in