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The contribution of product quality to competitive advantage: impacts on systematic variance and unexplained variance in returns

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  • Mark Kroll
  • Peter Wright
  • Richard A. Heiens

Abstract

In our study, we argue that product quality may enhance competitive advantage, leading to increased returns but a reduction in variance in returns. More specifically, based on our analyses of strategy‐related theories, we propose a model in which a positive relationship is predicted between relative product quality and relative market share and between relative product quality and returns. An inverse association is predicted between quality and both systematic variance and unexplained variance in returns. Finally, relative product quality is expected to indirectly lower the variance in returns but enhance returns through the link between product quality, market share, and direct costs. Our findings are generally supportive of the model’s stipulations. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • Mark Kroll & Peter Wright & Richard A. Heiens, 1999. "The contribution of product quality to competitive advantage: impacts on systematic variance and unexplained variance in returns," Strategic Management Journal, Wiley Blackwell, vol. 20(4), pages 375-384, April.
    • Handle: RePEc:bla:stratm:v:20:y:1999:i:4:p:375-384
    DOI: 10.1002/(SICI)1097-0266(199904)20:43.0.CO;2-Y
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    Cited by:

    1. Morita, Michiya & Machuca, Jose A.D. & Flynn, E. James & Pérez de los Ríos, José Luis, 2015. "Aligning product characteristics and the supply chain process – A normative perspective," International Journal of Production Economics, Elsevier, vol. 161(C), pages 228-241.
    2. Lees, Nic & Nuthall, Peter & Wilson, Mark M.J., 2020. "Relationship quality and supplier performance in food supply chains," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 23(3), August.
    3. Maiga, Adam S. & Nilsson, Anders & Ax, Christian, 2015. "Relationships between internal and external information systems integration, cost and quality performance, and firm profitability," International Journal of Production Economics, Elsevier, vol. 169(C), pages 422-434.
    4. María del Mar Ramos-González & Mercedes Rubio-Andrés & Miguel Ángel Sastre-Castillo, 2022. "Effects of socially responsible human resource management (SR-HRM) on innovation and reputation in entrepreneurial SMEs," International Entrepreneurship and Management Journal, Springer, vol. 18(3), pages 1205-1233, September.
    5. Claver-Cortés, Enrique & Pertusa-Ortega, Eva M. & Molina-Azorín, José F., 2012. "Characteristics of organizational structure relating to hybrid competitive strategy: Implications for performance," Journal of Business Research, Elsevier, vol. 65(7), pages 993-1002.
    6. Sougata Ray & Bikramjit Ray Chaudhuri, 2018. "Business Group Affiliation and Corporate Sustainability Strategies of Firms: An Investigation of Firms in India," Journal of Business Ethics, Springer, vol. 153(4), pages 955-976, December.
    7. M. à ngeles López-Cabarcos & Sérgio Göttling-Oliveira-Monteiro & Paula Vázquez-Rodríguez, 2015. "Organizational Capabilities and Profitability," SAGE Open, , vol. 5(4), pages 21582440156, November.
    8. Sandra A. Vannoy & A. F. Salam, 2010. "Managerial Interpretations of the Role of Information Systems in Competitive Actions and Firm Performance: A Grounded Theory Investigation," Information Systems Research, INFORMS, vol. 21(3), pages 496-515, September.
    9. Jonathan D. Bohlmann & Peter N. Golder & Debanjan Mitra, 2002. "Deconstructing the Pioneer's Advantage: Examining Vintage Effects and Consumer Valuations of Quality and Variety," Management Science, INFORMS, vol. 48(9), pages 1175-1195, September.
    10. Nicolau, Juan Luis & Sellers, Ricardo, 2002. "The stock market's reaction to quality certification: Empirical evidence from Spain," European Journal of Operational Research, Elsevier, vol. 142(3), pages 632-641, November.
    11. Victoria Pekka Economou & Pantelis G. Chatzikonstantinou, 2009. "Gaining Company’s Sustained Competitive Advantage, Is Really a Necessary Precondition for Improved Organizational Performance? The Case of TQM," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 83-100.
    12. Mahdi Salehi & Mahdi Moradi & Samaneh Molaei, 2015. "Forecasting systematic risk by Least Angel Regression, AdaBoost and Kernel Ridge Regression," Modern Applied Science, Canadian Center of Science and Education, vol. 9(11), pages 135-135, October.
    13. Desalegn A. Gugissa & Paul T.M. Ingenbleek & Hans C.M. van Trijp & Mebrahtu L. Teklehaimanot & Workneh K. Tessema, 2021. "When natural resources run out, market knowledge steps in: Lessons on natural resource deployment from a longitudinal study in a resource‐scarce region of Ethiopia," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 1598-1609, May.
    14. Chia-Chi Lee, 2014. "Performance evaluation of CPA firms in Taiwan from the perspective of industry-specific client groups," Service Business, Springer;Pan-Pacific Business Association, vol. 8(2), pages 267-293, June.
    15. Wang, Xuerong & Leng, Mingming & Song, Jingpu & Luo, Chunlin & Hui, Sunyuen, 2019. "Managing a supply chain under the impact of customer reviews: A two-period game analysis," European Journal of Operational Research, Elsevier, vol. 277(2), pages 454-468.
    16. Chi-Hsiang Chen & Ming-ji Lin, 2011. "An assessment of post-M&A integration influences on new product development performance: An empirical analysis from China, Taiwan, and HK," Asia Pacific Journal of Management, Springer, vol. 28(4), pages 807-831, December.
    17. García-Villaverde, Pedro M. & Ruiz-Ortega, María J. & Parra-Requena, Gloria, 2012. "Towards a comprehensive model of entry timing in the ICT industry: Direct and indirect effects," Journal of World Business, Elsevier, vol. 47(2), pages 297-310.

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