The effect of internal quality integration on financial performance: the mediating role of product innovation

Abstract

PurposeThis study aims to examine the joint effect of internal quality integration and product innovation on financial performance by considering the mediating roles of incremental and radical product innovation.Design/methodology/approachA theoretical framework was developed using the organizational capability view. Based on empirical survey data collected from 209 Chinese manufacturing firms, this research uses structural equation modeling and the bootstrapping method to test hypotheses.FindingsThe results show that internal quality integration positively impacts incremental and radical product innovation and financial performance. Further, incremental product innovation can promote radical product innovation. Both incremental and radical product innovation partially mediate the relationship between internal quality integration and financial performance.Practical implicationsThe findings provide practical guidance for manufacturing companies to engage in quality integration and product innovation. Managers should encourage the internal functional departments to coordinate quality integration while promoting incremental and radical product innovation to occupy a larger market and achieve higher performance.Originality/valueThis research contributes to the literature in two ways. First, this study expands the theoretical research framework of the joint effects of quality integration and product innovation on financial performance. Second, through testing the mediating role of product innovation, this study provides empirical evidence for the intermediate role of internal quality integration for improving financial performance.