Purpose – The purpose of this paper is to investigate the relationship between Six Sigma, organizational learning and innovation performance. Also, whether organizational learning advance innovation performance by playing a mediating role between Six Sigma and innovation performance, probing the moderating effects of organizational types between six sigma and organizational learning, and also testing a proposed model to explain the relationships among Six Sigma, organizational type organizational learning, and innovation performance through an empirical examination in the Indian industry context.
Design/methodology/approach – Correlations are used to analyze the degree of relationship between constructs and to further understand the direct and indirect effects, as well as the moderating and mediating effects among the constructs in model, structural equation modeling is conducted using AMOS 6.0 on data collected from Indian industries.
Findings – This study proves the positive relationship between Six Sigma and organizational learning. It also confirms that Six Sigma role structure and Six Sigma focus on metrics contributes positively to organizational innovation, however, Six Sigma structured improvement procedure was found to be negatively related to organizational innovation, thus contributing to Six Sigma-Innovation Paradox. This study also rejects moderating effects of organizational type between Six Sigma and organizational learning.
Research limitations/implications – Cultural context is a critical factor not only on Six Sigma, but also organizational learning, and organization innovation for investigating hence future study should consider this aspect. This research suggests the need for more intensive research to explore in more depth the relationship between Six Sigma structured improvement procedure, and the administrative and the technical innovation to identify the existence of potentially mediating variables in order to understand what is named the Six Sigma-Innovation Paradox.
Practical implications – The findings are useful for business managers in developing countries such as India, who want to enhance business performance through implementing Six Sigma practices that support their firm’s product and services innovation efforts.
Originality/value – The study has contributed to establishing an empirical research between Six Sigma, organizational learning and organizational innovations that facilitates more quality management research in developing countries. It has contributed to clarifying the disputed relationship between Six Sigma practices and the firm’s learning and innovativeness, and shows empirical evidence in India to confirm that the Six Sigma practices deployed by a firm has a positive impact on its organizational learning. Six Sigma focuses on role structure and metrics contributed positively to innovation, however the Six Sigma effect of procedure on organizational innovation is negatively related, thus opening new areas of Six Sigma-Innovation Paradox.
Numerous researchers have avowed that the Six Sigma strategy is a potentially useful tool for fostering learning and escalating a company’s competitive advantage. Fast changing markets require the progress of technological innovation, and shorter product lifecycles always challenge the competitive advantage (Baker and Sinkula, 1999; Prajogo and Sohal, 2003; Tidd et al., 1997). As pointed out by Nonaka and Takeuchi (1995) and Bontis et al. (2002), the learning ability can stimulate organizational innovation capability and maintain a competitive advantage in tumultuous environments. Deming (1986) states that learning encourages innovation activities, and “quality” is the principal determinant of success in competitive environments. As a result, enterprises can sustain a competitive advantage by continually reproducing of Six Sigma. In addition, above quantitative studies only focused on three types of firms. Some studies indicate a relationship between organizational learning and innovation (Baker and Sinkula, 1999; Hung et al., 2009). As a result, both Six Sigma and organizational learning can independently and effectively encourage innovation. Nonetheless, no previous empirical studies investigate whether organizational learning mediates Six Sigma and innovation performance moderated by type of organization.
The rationale of this study is to scrutinize four things:
(1) Determining the relationships between Six Sigma, organizational type, organizational learning, and innovation performance.
(2) Investigating if organizational learning advance innovation performance play a mediating role between Six Sigma and innovation performance.
(3) Probing the moderating effects of organizational types between Six Sigma and organizational learning.
(4) Testing a proposed model to explain the relationships among Six Sigma, organizational type, organizational learning, and innovation performance through an empirical examination.
2. Theoretical frame work
2.1 Six Sigma
Six Sigma is a new approach to quality management (Su et al., 2006; Kumar et al., 2008). Six Sigma was initiated by Motorola Inc. in the 1980s and has been defined as:
[...] an organized and systematic method for strategic process improvement and new product and service development that relies on statistical methods and the scientific method to make dramatic reductions in customer defined defect rates (Linderman et al., 2003, p. 195).
Some argue that Six Sigma is just a repackaging of TQM (Stamatis, 2000) and that “TQM makes many of the same claims that Six Sigma makes and with some justification” (Flott, 2000, p. 43). However, recent research suggests that Six Sigma introduces new and distinct concept and practices into quality management. In a grounded-theory-based search for the essence of Six Sigma, Schroeder et al. (2008) argued that although Six Sigma shares the tools and techniques with traditional quality management methods, it provides an organizational structure not previously seen. They suggested that Six Sigma presents “an organized, parallel-meso structure to reduce variation in organizational processes by using improvement specialists, a structured method, and performance metrics with the aim of achieving strategic objectives” (Schroeder et al., 2008, p. 5). In addition, Zu et al. (2008) empirically identified three distinctive practices essential for applying Six Sigma principles and methods, which are Six Sigma role structure, Six Sigma structured improvement procedure, and Six Sigma focus on metrics. Other research about the critical success factors for Six Sigma implementation also supports the existence of these Six Sigma practices (Nonthaleerak and Hendry, 2008; Szeto and Tsang, 2005).
2.2 Organizational learning
Liaoa et al. (2008) states that all humans are born with the ability to learn and it is through learning that they adapt to the changing and evolving environment. Learning leads to new insights and concepts. It often occurs when we take effective actions and when we detect and correct our own mistakes (Argyris and Schon, 1978). As regards to the learning of an organization, Morgan and Ramirez (1983) suggest that organizational learning occurs when members use learning to solve a common problem they are facing. Every organization will develop the most suitable learning method taking into consideration the needs and characteristics of the organization itself (Helleloid and Simonin, 1994). There are two types of organizational learning commonly discussed in the literature. First, exploitative learning (March, 1991) is the acquisition of new behavioral capacities framed within existing insights. Exploitative learning is described in the literature as “single-loop”(Argyris and Schon, 1978, 1996), “operational” (Coopey, 1996), “first-order” (Fox-Wolfgramm et al., 1998), “evolutional”, “frame-taking”, “reactive” (Weick and Westley, 1996) and “incremental” (Miner and Mezias, 1996).
Second, explorative learning (March, 1991) occurs when organizations acquire behavioral capacities that differ fundamentally from existing insights. Exploration is about discovery, variation, effectiveness, flexibility and innovation (March, 1991; Weick and Westley, 1996). This type of organizational learning is referred to as “double-loop” (Argyris and Schon, 1978, 1996), “strategic” (Coopey, 1996), “second-order” (Fox-Wolfgramm et al., 1998),“revolutionary”, “frame-breaking”, “proactive” (Weick and Westley, 1996) and “radical” (Miner and Mezias, 1996). Different organizational structures are conducive to different types of learning. Mechanistic structures with tightly coupled relationships between actors foster exploitative learning in stable contexts, while organic structures with loosely coupled relationships are favorable to the occurrence of explorative learning in changing contexts (Burns and Stalker, 1961; Weick and Westley, 1996; Rowley et al., 2000; Hansen et al., 2001). In addition, Clegg et al. (2005) propose a perspective that sees learning not as something that is done to organizations, or as something that an organization does; rather, learning and organizing are seen as mutually constitutive and unstable, yet pragmatic, constructs that might enable a dynamic appreciation of organizational life. Therefore, in a long-term development, organizational learning may contain both natures of exploitative and exploration learning on different organization types and development stages in order to keep organization constantly growth. On the other hand, Kim (1993) and Morgan (1997) describe the learning process as the acquisition, interpretation and implementation of new knowledge; and similarly Huber (1991) identifies it as the acquisition, dissemination, interpretation and storage of new knowledge.
Argote (1999) view that organizational learning involves three stages: acquisition, sharing and storage. Interpretation is not seen as a discrete stage but more as an activity arising throughout the learning process. Furthermore, implementation is not a necessary element of the process since as learning refers to the evolution of cognitive capacities, which may or may not lead to action. Therefore, a learning organization has the ability to continuously adjust to new situations and to renew itself according to the demands of the environment (Jaw and Liu, 2003). To enhance its capability to learn, an organization should establish a system where individual learning can be shared among members (Tsang, 1997). Learning by an individual forms the basis of organizational learning; it is through individual learning that an organization will also learn as a whole (Grant, 1996). However, Adams et al. (1998) identify inertia as a barrier that hinders an organization’s capabilities for learning about markets for new product development. In addition, knowledge inertia may inhibit the learning ability of an individual (Liao, 2002). This may in turn affect organizational learning.