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The impact of total quality management adoption on small and medium enterprises’ financial performance


  • The authors wish to express our appreciation to Professor Deryl Northcott and the anonymous reviewer for their helpful and constructive comments. We would also like to thank seminar participants at The University of Auckland, as well as participants at the Small Enterprise Association of Australia and New Zealand 16th Annual Conference (Ballarat, Australia, September 2003), Auckland Regional Accounting Conference (Manakau Institute of Technology, New Zealand, December 2005), International Council for Small Business World Conference (Turku, Finland, June 2007).


This paper examines whether the management accounting practice of total quality management (TQM) positively impacts on the financial performance of small and medium enterprises (SMEs). While research has investigated the impact of TQM on larger firms, to date, there has been no comprehensive analysis of the impact of TQM on SMEs’ financial performance. Our analysis of Australian Bureau of Statistics financial data for 3776 SMEs found no evidence that TQM improved financial performance after controlling for size and risk. Our results contribute to literature by highlighting that management accounting practices developed for larger companies may not necessarily be transposable to SMEs.

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