An empirical investigation of the relationship between Six Sigma practices

and organizational innovation

Introduction

Six Sigma is a process improvement programme that is increasingly adopted in industry to

pursue continuous improvement in process management and product development (Linderman,
Schroeder, Zaheer, & Choo, 2003; Schroeder, Linderman, Liedtke, & Choo, 2008; Shafer &
Moeller, 2012). There have been debates about whether Six Sigma is beneficial for
organizational innovation. Some researchers contend that Six Sigma serves as a foundation or a
catalyst for organizational innovation (Antony, Setijono, & Dahlgaard, 2014; Byrne, Lubowe, &
Blitz, 2007). In their opinion, Six Sigma helps organizations make a breakthrough in innovations
that achieve far-reaching improvements in their business performance. Especially, Six Sigma
enables companies to create an organizational climate where innovation has been expected
(Byrne et al., 2007). Some researchers hold a neutral view, debating that although Six Sigma and
innovation are different approaches, they can co-exist perfectly in a disciplined and broad
organization (Hoerl & Gardner, 2010; Rae, 2007). There are also criticisms that Six Sigma’s
emphasis on standardization and variation reduction will restrict the freedom required for
innovation and even drag organizations down (Johnstone, Pairaudeau, & Pettersson, 2011;
Tushman, 2006). However, there lacks empirical research investigating the effect of Six Sigma
on organizational innovation (Shafer & Moeller, 2012).
To fill the gap in the literature, this study seeks to examine the relationship between Six Sigma
practices and different types of organizational innovation. This research collected empirical data
from 249 firms in China which have implemented Six Sigma as a formal process improvement
programme in their organizations. The results show that Six Sigma management, infrastructure,
and core practices have a positive relationship to all three types of innovation – product
innovation, process innovation, and administrative innovation. The results of this study provide
insights to help organizations take advantage of their Six Sigma programmes to facilitate
organizational innovation.

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Theoretical background
Organizational Innovation
In general, organizational innovation refers to the creation or adoption of new ideas, knowledge,
skills, and methods that can create value and improve competitiveness of organizations (Daft,
1978; Kim, Kumar, & Kumar, 2012). Organizational innovation can be categorized into three
types: product innovation, process innovation, and administrative innovation (Bon & Mustafa,
2013; Kim et al., 2012). Product innovation refers to changes at the end of providing products or
services, including creating new products or services and improving on existing products or
services (Bon & Mustafa, 2013). Process innovation is defined as the changes in the method of
producing products or services, focusing on improvement on the effectiveness and efficiencies of
production or service processes (Bon & Mustafa, 2013; Moura E Sa´ & Abrunhosa, 2007).
Administrative innovation refers to the application of new ideas to improve organizational
processes, routines, structures, or systems (Damanpour, 1987; Weerawardena, 2003).
Six Sigma Practices
Antony and Banuelas (2002) and Coronado and Antony (2002) analyzed the critical success
factors (CSFs) of Six Sigma implementation. These factors were tested in the UK organizations,
and arranged in descending order of importance as follows: management commitment and
involvement; understanding of Six Sigma methodology, tools, and techniques; linking Six Sigma
to business strategy; linking Six Sigma to customers; project selection, reviews, and tracking;
organizational infrastructure; cultural change; project management skills; linking Six Sigma to
suppliers; and training. Brun (2011) analyzed Six Sigma implementation in Italian companies
and slightly adjusted the above CSFs list and collected data in Italian companies in order to find
out if the CSFs are the same set as that in the international literature. In his study, Brun found
that the level of relevance of a CSF is the same in the case of India and UK in Antony’s study.
Antony and Desai (2009) empirically investigated the Six Sigma status and the CSFs for Six
Sigma implementation in the Indian industries. Furthermore, Desai, Antony, and Patel (2012)
explored the CSFs of Six Sigma implementation for different sizes and sectors of Indian
industries through an exploratory empirical investigation. Habidin and Yusof (2013) carried out
a study in the Malaysian automotive industry and summarized the Lean Six Sigma CSFs as
leadership, structured improvement procedure (SIP), quality information and analysis, supplier

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relationship, just in time, customer focus, and focus on metric. Sharma and Chetiya (2012)
explored Six Sigma CSFs in the context of Indian manufacturing organizations.
They extracted seven groups of underlying CSFs through 22 factors reviewed from an 460 Z. He
et al. extensive literature, and proposed a Six Sigma adoption model in Asian context. Yusr,
Othman, and Mokhtar (2012) summarized that there are seven CSFs mentioned in the literature,
including management involvement and commitment; culture change; organizational
infrastructure; training; linking Six Sigma to business strategy, customer, employees, and
supplier; project prioritization, selection and project management skills; and understanding tools
and techniques through Six Sigma.
They also introduced a conceptual framework discussing the effect of three dimensions – Six
Sigma role structure (RS), Six Sigma SIP, and focus on metrics (FOM) – on the innovation
performance based on the absorptive capacity theory perspective. The above CSFs are helpful for
us to identify Six Sigma practices.
Multiple practices are needed to create a comprehensive system in the organization to deploy Six
Sigma. Previous studies on Six Sigma suggested various practices associated with Six Sigma
implementation. Schroeder et al. (2008) identified four elements in Six Sigma, such as parallel
meso structure including strategic project selection and leadership engagement, improvement
specialists, structured method, and customer-oriented and financial performance metrics.
Similarly, Zu, Fredendall, and Douglas (2008) suggested three distinctive practices in Six Sigma
as compared with traditional quality management practices: Six Sigma RS, Six Sigma SIP, and
Six Sigma FOM. Lee and Choi (2006) considered information system, communication,
education/training, and policy/system as key practices of Six Sigma. He (2009) established a set
of criteria for assessing Six Sigma maturity in organizations by the core values in leadership,
strategy, customer focus, infrastructure, project management, evaluation and motivation, and
business results. Choi, Kim, Leem, Lee, and Hong (2012) measured Six Sigma implementation
by information utilization, standardization, promotion, CEO’s will, communication, training, and
policy. Based on previous research, in this study we include five practices that are commonly
identified as critical components for Six Sigma implementation, including top management
support and commitment (TMSC), Six Sigma RS, information & data system (IDS), Six Sigma
SIP, and Six Sigma FOM. Table 1 illustrates these five constructs of Six Sigma practices and the
related descriptions.

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According to the classification of Flynn et al. (1995) and Lakhal, Pasin, and Limam (2006), these
five factors can be grouped into three categories, namely, management practice, infrastructure
practices, and core practices. Management practice refers to the responsibilities of top managers.
The infrastructure practices are intended to create an environment supporting the implementation
of Six Sigma core practices. And the core practices focus on applying tools and techniques in
continuous improvement (Flynn et al., 1995; Sousa & Voss, 2002; Zu et al., 2008). The
classification constitutes the foundation of the model in this study investigating the links between
Six Sigma practices and organizational innovation.
Research model and hypotheses
TMSC is identified as one of the CSFs and the foundation of Six Sigma (Breyfogle, Cupello, &
Meadows, 2001; Suresh, Antony, Kumar, & Douglas, 2012). Six Sigma implementation needs to
originate from the top executives who can use their authority and power to establish a team of
Six Sigma with specific responsibilities, to integrate the Six Sigma black and green belts system
into the organization’s human resource infrastructure, to provide needed resources for Six Sigma
training, to build an effective communication and sharing environment for Six Sigma, and to
remove other barriers of implementation (Breyfogle et al., 2001; Zu et al., 2008). The top-down
Six Sigma Total Quality Management projects deployment is implemented by improvement
specialists from a parallel-meso structure, thus systematically collection of data and effectively
communication of information during the process of problem-solving are especially important
(Schroeder et al., 2008). The impact of top management support on Six Sigma RS and IDS was
confirmed by some studies (Ragu-Nathan, Apigian, Ragu-Nathan, & Tu, 2004; Zu et al., 2008).
Thus, we suggest that: Table 1. Six Sigma practices proposed in the literature.
Categories Practices Related constructs Descriptions Management practices, Top management
support and commitment (TMSC), Top management support (Zu et al., 2008), Leadership (He,
2009), CEO’s will (Choi et al., 2012), Leadership management (Schroeder et al., 2008) Top
managers participate in and allocate resources for Six Sigma initiatives. Top management makes
objectives, strategies, and vision for Six Sigma implementation and communicates clearly to all
employees Infrastructure practices Six Sigma RS Parallel-meso structure and improvement
specialists (Schroeder et al., 2008), Six Sigma RS (Zu et al., 2008), Infrastructure (He, 2009)
A ‘parallel-meso structure’ that is parallel to and outside of the typical organizational structure
and integrates all ranks of specialists. Six Sigma improvement specialists lead the organizations

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efforts in quality improvement. IDS Statistical control and feedback (Flynn, Schroeder, &
Sakakibara, 1995), information system (Lee & Choi, 2006), information utilization (Choi et al.
2012) Systematic management process of information anddata resource in order to support the
cross functional communication and cooperation, which is essential in executing Six Sigma
projects Core practices Six Sigma SIP Methodology tool and application (On, 2006), Six Sigma
SIP (Zu et al., 2008), structure method (Schroeder et al., 2008) There is an emphasis on using a
data-driven, systematic, structured approach in quality improvement, which involves using
DMAIC in process improvement and DMADV or the like in product, service, and process
design.
H1: Six Sigma management practice is positively related to Six Sigma infrastructure
practices.
The infrastructure Six Sigma practices establish a learning and cooperative organizational
environment through equipping a hierarchical RS with different trained improvement specialists
and having a quality IDS, which is expected to support the application of Six Sigma core
practices (Flynn et al., 1995; Zu, 2009). Six Sigma SIP and FOM require Six Sigma RS to have
access to data related to product/process quality performance timely so as to identify critical
problems, analyze the root causes, and find out solutions (Zu et al., 2008). Although the literature
about the relationship between infrastructure practices and core practices of Six Sigma is limited,
relative studies on TQM (Flynn et al., 1995; Sousa & Voss, 2002; Zu, 2009) support the
following hypothesis:
H2: Six Sigma infrastructure practices have a direct positive effect on Six Sigma core
practices.
Six Sigma core practices’ effective implementation may enhance an organization’s product,
process, and administrative innovation directly. Formalized structured procedures help Six
Sigma project team members have a better understanding of the whole process and guide them to
use right tools to analyze and improve performance metrics (Sokovic, Pavletic, & Pipan, 2010).
Following the steps in the SIPs, Six Sigma project teams are more likely to meet the project
goals and to achieve improvement performance (Zu et al., 2008) and also create new business
knowledge. It has been proven that knowledge creation from Six Sigma practices has a positive
effect on internal business processes (Sin, Zailani, & Ramayah, 2010) as well as organizational
innovation (Parast, 2011). For Design for Six Sigma (DFSS) projects, Six Sigma design teams

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start with the voice of customers and then generate ideas to design or redesign products, services,
and processes. Tools such as Quality Function Deployment are used to translate the voice of the
customer to business and engineering language, and finally achieve product, service, and process
innovation in the organization (Hoerl & Gardner, 2010; Sin et al., 2010). Azis and Osada (2010)
suggested that DMAIC (Define-Measure-Analyze-Improve-Control) methodology creates
incremental innovation by promoting the improvement based on the existing condition, and the
DFSS approach allows for radical innovation by designing new products, services, or business
processes according to customer needs and expectations.
Moreover, with business performance metrics, Six Sigma teams may benchmark different
processes to find out the best practices, which can be used as learning examples and support
innovative activities (Dasgupta, 2003; Kim et al., 2012; Zu et al., 2008). Organizations will
become more efficient in finding and adopting the best practices and methods, in developing new
products from concept formation to commercial success (Kim et al., 2012). Six Sigma metrics
can be used to set specific improvement goals, which will inspire cross-functional team members
to work creatively to realize improvement objectives through innovating new products/processes,
reducing cycle time and cost, improving product/process quality, and reorganizing and
streamlining business management processes (Linderman et al., 2003; Sin et al., 2010; Zu et al.,
2008). Thus, Six Sigma core practices are important to organizations in pursuing product,
process, and administrative innovation. Hence, it is suggested:
H3a: Six Sigma core practices have a direct positive effect on product innovation.
H3b: Six Sigma core practices have a direct positive effect on process innovation.
H3c: Six Sigma core practices have a direct positive effect on administrative innovation.

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Six Sigma methods and tools may also be more or less effective in certain organizational
contexts (Swink & Jacobs, 2012). First of all, although Six Sigma has been implemented with
success in many large companies, there is still less documented evidence of its successful
implementation in small-/medium-sized companies. It is a common fallacy that Six Sigma works
only in large organizations (Kumar, Antony, Madu, Montgomery, & Park, 2008).
Six Sigma is also applicable to small businesses. Large firms and small firms have inherent
different characteristics (Baker, Grinstein, & Harmancioglu, 2015); thus, it is interesting to find
out whether firm size matters for Six Sigma implementation or not. Moreover, ownership type is
a distinct organizational factor demanding special attention for studying operations management
issues in China (Li, Chau, & Lai, 2010; Zhao, Flynn, & Roth, 2007; Zu, Zhou, Zhu, & Yao,
2011). It is likely to occur that firms with different ownership types may implement Six Sigma
practices at different levels, considering the substantial differences in their history, traditions,
and cultures (Zu et al., 2011). To verify the contingency perspective of Six Sigma and
innovation, we examine these two contextual factors
– Firm size and ownership – to provide more evidence on whether and how contextual factors
affect the effectiveness of Six Sigma implementation. Hence following hypotheses are proposed:
H4a: The model relationships among Six Sigma practices and innovations vary across
firms of large and small sizes.
H4b: The model relationships among Six Sigma practices and innovations vary across state
owned and non-state-owned firms.

Based on the above hypotheses, a research model is constructed as shown in Figure 1. The model
shows the relationship between Six Sigma practices and organizational innovation performance.

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 Research Gap
This research is subject to several limitations.
i.The present sample is more biased towards larger firms, state-owned firms, and firms with
longer duration of Six Sigma implementation in the manufacturing industry, as the sample sizes
for small firms, non-state-owned firms, service industry firms, and short-duration firms are
relatively small, which may limit the generalisability of the findings.
ii. This study is restricted to Six Sigma firms only in China. Further research can be extended to
different countries, especially if culture differences are considered as an important factor.

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