Science, Specific Knowledge and Total Quality Management
Karen H. Wruck
Ohio State University - Fisher College of Business, Department of Finance
Michael C. Jensen
Social Science Electronic Publishing (SSEP), Inc.; Harvard Business School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Harvard Business School Working Paper No 94-003
We analyze Total Quality Management (TQM) from an economic and organizational perspective. We find that TQM is a new organizing technology that is science-based, non-hierarchical, and non-market-oriented. It improves productivity by encouraging the use of science in decision-making and discouraging counter-productive defensive behavior. It also encourages effective creation and use of specific knowledge throughout the organization. Effective implementation of TQM generally requires major changes in all three components of the organizational rules of the game, namely systems for allocating decision rights, performance measurement systems, and reward and punishment systems.
Note: A revised and shortened version of this paper is published under the same title in the Journal of Applied Corporate Finance, Summer 1997, Vol. 10, No 2. You can download it at: "Science, Specific Knowledge, and Total Quality Management".
Number of Pages in PDF File: 38
JEL Classification: D23, L15, L22, M10, M14, O31
Date posted: July 11, 1994