Nou Cives 2 Ciències Socials, Geografia i Història Ed Vicens Vives

2.4.1 Introduction

Generally speaking, „organizational characteristics‟ is a broad term referring to all firm- related characteristics, but the term is used differently in different research. However, the term „organisational characteristics‟ commonly includes discussion on firm size, goods produced, the nature of the business, type of production system, ownership structure and firm location (Fouayzi et al., 2006; Jayasinghe-Mudalige & Henson, 2004), and financial characteristics (Herath et al., 2007). It can also include managerial characteristics and organisational structure (Damanpour, 1987).

In a more general sense, a number of the authors have identified organizational characteristics that encourage innovation adoption within an organization (Rogers, 1995). While much research has examined the influence of organizational characteristics, it has been argued that there remains a gap relating to the lack of consensus regarding the role of specific variables in facilitating or impeding innovation adoption (Damanpour, 1991). Therefore, further research

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on the association between organizational characteristics and innovation adoption in the form of quality assurance systems, would be useful.

2.4.2 Size of firm

In the literature, there is some evidence of a relationship between firm size and the adoption of a QAS. For example, recent studies indicated that incentives for ISO 9000 adoption differ depending on firm size (Holleran & Bredahl, 1997; Lloyds Register Quality Assurance, 1995; Seldon et al., 1993), and for HACCP adoption (Antle, 1996; MacDonnald et al., 1996; Anderson & Lee, 2001; MacDonald & Crutchfield, 1996).

Small firms have often been slow to adopt QA systems (Brown & Loughton, 1998; Yusof & Aspinwall, 2000). Firm size directly affects certification costs, which, in turn, affects the ability of a firm to undertake certification. One of the main criticisms of ISO 9000 certification is that it really addresses large companies that have not only the required financial resources, but also the skilled workforce and the competent management able to document the scheme, carry out changes and audit the new processes (Tsekouras et al., 2002). Likewise, Celaya et al. (2007)found firm size had a favourable influence on HACCP adoption when consisting of firms that had more than 50 employees in relation to firms with less than 50 employees.

Small firms‟ resources are more limited than those of large firms. Small firms may not have a quality assurance office, so staff resources may need to be diverted to QAS adoption to complete the paperwork, implement the systems and maintain the system. Implementing ISO 9000 typically forces small firms to allocate proportionately more resource to implementation of this system than large firms (Holleran et al., 1999). As a result, it is not surprising to find study results that indicated that larger firms are more likely to adopt QAS than small firms in the dairy sector in Poland (Pieniadz & Hockmann, 2007).

However, some studies on the relationship between firm‟s size and adoption of QAS‟s indicate contrasting results. As expected, several authors have suggested that the implementation of QAS is size dependent (Ghodbadian & Gallear, 1996; Seldon et al., 1993, Holleran et al., 1999) and others note that ISO is positively linked to firm size (Adam, 1999; Garr et al., 1997). However, results from another study did not find significant differences in

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seeking ISO 9000 in terms of firm size (Briz et al., 2005). Thus, research to determine whether this association holds in the Vietnamese dairy processing sector would be useful.

2.4.3 Top management support

In addition to the firm size factor, another factor that possibly affects the adoption of quality assurance systems is top management support. To obtain quality results, it has been noted that the initiative must be taken at the highest managerial levels (Vasconcellos, 2004). Top management support and commitment has a vital role when adopting a quality system, since they will be responsible for identifying the main process needed for a quality system and its application throughout the organization (Aggelogiannopoulos et al., 2007). They will also establish suitable performance indicators for each of the main processes of the organization in order for them to be monitored and measured (Geraedts et al., 2001).

Top management commitment is also important for the success of a quality initiative that has been implemented. For instance, according to the guide for implementing ISO 9001: 2000, the top management (managing director or chief executive) must demonstrate a commitment and a determination to implement the quality system in the organization. Without such top management commitment, no quality initiative can succeed.

Commonly, decision making starts from top managers on the basis of a cost-benefit analysis of adopting a QAS. Top managers will have a good understanding of the expected and potential benefits of adopting such a system (that is increase in sales, less rejects/product out of specification/rework product, and so on) (Khatri & Collins, 2007). Management support may take several forms, such as providing strategic vision and directing various levels of the organization towards the importance of an innovation (Ramanurthy & Premkumar, 1995), and also refers to “the continual active and enthusiastic approval of senior executives for a proposed innovation” (Sultan & Chan, 2000, p. 111).

In this regard, Kaynak (2003), and Spiegel (2002) indicated that successful implementation of quality assurance systems also require an effective change in organisational culture, which is almost impossible without concentrated management support. The management of firms can show such support by establishing both organizational and technical systems to communicate internally and externally about their quality performance (Beulens et al., 2003).

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Thus, top management support is a critical issue in innovation adoption and deployment (Teo

et al. 1998). They do this through providing a supportive climate and adequate resources (Premkumar & Robbers, 1999; Rogers, 1995; Sultan &Chan, 2000; Zmud, 1984).

Characteristics of top management can also affect the decision to adopt a new QAS. For instance, previous studies identified the educational level of top managers, their skills and awareness, and their ability to manage risks after a decision (Papadakis & Barwise, 2002) as important factors. There are also research studies on the impact of the top manager on strategy decision making (Kauer et al., 2007; Papadakis & Barwise, 2002). Thus, human characteristics pertaining to the management of a firm like age, level of education, and risk tolerability, and so on, are thought to have an impact on the decision of a firm, both implicitly and explicitly, to adopt a QAS or not (Caswell et al., 1998).

2.4.4 Organisational structure

Three properties of organisational structure - formalization, centralization, and complexity – have been identified in previous business organization research (Choi, 2002; Damanpour 1991). Formalization refers to the degree to which decisions and working relationships are governed by formal rules, standard policies and procedures (Holsapple & Joshi, 2001). It includes „the degree to which an organization emphasizes following rules and procedures in the role performance of its members (Rogers, 1995, p.380), and implies that all procedures for a quality standard is written, and unit responsibility is assigned to divisions of departments. If this occurs, the potential of adopting a QAS become easier. For instance, if the firm has a quality division and has experience in a particular QAS, it is easier to implement another QAS. Most innovation research reports formalization to be positively associated with the adoption of innovation (Moch & Morse, 1977; Zmud 1982).

Centralisation refers to the place in the organization where decisions are made, and defines the groups that have the power to contribute to the decision making process (Neil, 2006). That is, it identifies which organization members participate in decisions associated with strategies, policies and allocating resources (Hage & Aiken 1967). Likewise, it is „the degree to which power and control in a system are concentrated in the hands of relatively few individuals (Rogers, 1995, p.379). This can also be referred to as the locus of decision authority and control within an organizational entity (Caruane et al., 1998). Concentration of

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power in a group of persons may contribute to a fast decision to adopt a new innovation such as a QAS. Prior research findings vary with regard to the influence of centralization on innovation adoption (Rogers, 1995; Zmud, 1982). While some authors have found a negative influence (Damanpour 1991; Grover and Goslar 1993; Moch & Morse, 1977), others have found an insignificant relationship between centralization and adoption of innovation (Lai & Guynes, 1997).

Complexity entails “division of labor, job titles, multiple divisions, and hierarchical levels” (Hall, 1992, p. 50). In a complex organization, tasks are divided (horizontal complexity), supervised (vertical complexity), and dispersed to field or branch offices (geographical complexity). Complexity is comprised of horizontal and vertical differentiation, where horizontal differentiation refers to the number of different positions and different sub units in the organization and vertical differentiation refers to the number of job positions between the top layer and those involved with the actual production of output and the greater the number and diversity of occupations, the greater the complexity.

The influence of organizational structure on decisions has been shown in studies of relationship knowledge management and organizational structure, and organizational performance (Choi, 2002); adoption of new innovations and organizational structure (Damanpour, 1991), and quality and firm performance and firm structure (Spiegel, 2004). Specific research on the impact of this factor on the adoption of QAS‟s would be useful.

2.4.5 Nature of firm and product

The financial situation of a firm may be seen as a factor that affects a decision whether to adopt a QAS or not, and one study does indicate that the financial status of a firm will have an impact on its decision to adopt a QAS (Antle, 1996). Commonly, investing in obtaining and maintaining QAS‟s in a firm is acknowledged to be a strategic instrument in both food marketing and production (Achterbosch & van Tongeren, 2002), which indicates a long term perspective. For a company with an adequate financial budget, investment in a QAS is a small item, but for other firms lacking financial resources, investment in a QAS becomes more difficult. Specific variables related to a firm‟s financial status that are used commonly in the studies on impact of organizational factors on the adoption of a QAS are fixed assets

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value, ratio of turnover per fixed assets value (see Herath, 2007; Hassan et al., 2009), and average annual revenue (Teo et al., 2009).

Production processes have a number of specific characteristics that affect product quality and quality assurance; for instance, dairy products require cooling, storage and transport. Where product has a high risk of being unsafe, then measures for addressing this would receive more attention and be rapidly introduced. In addition, quality variations can appear among producers and different lots of produce (Trienkens & Zuurbier, 2008). This can create issues in adopting a QAS, since factors related to product quality and safety variations have to be addressed. Research has been conducted on exploring differences in adopting and implementing QAS‟s across sub-sectors in the food industry, such as fruit, vegetables, cereal, and wine (see Canavari et al., 1998); and food processing and services (Jin et al., 2006), or with particular products of firms (Jayasinghe-Mudalige & Henson, 2004).

Other characteristics are also important factors such as age of firms, experience in alternative QAS application. Type of production activities (Herath et al., 2007; Hassan et al.,2009; Cao, 2008), type of ownership (Ebrahimpour et al., 1997; Henriques &Sadorskey, 1996; Jayasinghe-Mudalige & Henson, 2004; Salahedin, 2007), and customers of firms (Jayasinghe-Mudalige & Henson, 2004) are shown in studies on relationships between firm characteristics and adoption of QAS.

In conclusion, organisational characteristics variables that are highlighted in previous studies are very diverse. However, major variables such as firm size, top management, organisational structure, and financial and product nature have been shown to affect the adoption decision of firms to a greater or lesser degree. A study integrating all these variables in the decision to adopt a QAS would be useful.