Total Quality Management & Business Excellence

ISSN: 1478-3363 (Print) 1478-3371 (Online) Journal homepage: http://www.tandfonline.com/loi/ctqm20

Shared knowledge mediated correlation

between cultural excellence and organisational
performance

Ghasem Rezaei, Hamed Gholami, Awaluddin Bin Mohamed Shaharou,

Muhamad Zameri Mat Saman, Laleh Sadeghi & Norhayati Zakuan

To cite this article: Ghasem Rezaei, Hamed Gholami, Awaluddin Bin Mohamed Shaharou,
Muhamad Zameri Mat Saman, Laleh Sadeghi & Norhayati Zakuan (2015): Shared knowledge
mediated correlation between cultural excellence and organisational performance, Total
Quality Management & Business Excellence, DOI: 10.1080/14783363.2015.1090292

To link to this article: http://dx.doi.org/10.1080/14783363.2015.1090292

Published online: 31 Oct 2015.

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 Total Quality Management, 2015
http://dx.doi.org/10.1080/14783363.2015.1090292

Shared knowledge mediated correlation between cultural excellence

and organisational performance

Ghasem Rezaeia , Hamed Gholamia, Awaluddin Bin Mohamed Shaharoua,
Muhamad Zameri Mat Samana, Laleh Sadeghib and Norhayati Zakuanc
a
Department of Industrial Engineering, Faculty of Mechanical Engineering, Universiti
Teknologi Malaysia (UTM), Skudai, Johor, Malaysia; bDepartment of Management, Sirjan
Branch, Islamic Azad University, Sirjan, Iran; cFaculty of Management, Universiti Teknologi
Malaysia (UTM), Skudai, Johor, Malaysia
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Culture of excellence (CoE) is a critical determining element for efficient organisational

performance (OP) in ever-competing global economy. Both manufacturing and service
sectors implement this aspect to maintain their competitive advantage. We report the
role of knowledge-sharing (KS) in strengthening the CoE and OP relationship in the
context of Iranian manufacturing sectors. Past developments, recent progress and
future trends in establishing such relation is comprehensively overviewed. A
conceptual framework is proposed and empirically tested to determine the impact of
KS on CoE and OP correlation. Managers from 222 European foundation for quality
management excellence award-winning manufacturing companies in Iran are selected
to conduct a case study via survey. Model is validated using Partial Least Squares
Structural Equation Modelling and the path modelling among the studied variables is
developed. It is demonstrated that CoE significantly impacts the OP, and KS partially
mediates CoE and OP relationship. The admirable features of the structural model
suggest that CoE can be advocated as a recommendable management system to
effectively support the organisational competitiveness. Present findings might
contribute towards the development of superior OP through the creation of a valid
and reliable measurement instrument for CoE. We further assert that the proposed
conceptual framework may offer interesting insights for practitioners and researchers.
Keywords: culture of excellence; organisational performance; knowledge-sharing

Introduction
Knowledge creation, sharing, using, and managing at diverse levels in organisations is
proved to be strategic resource for twenty-first-century escalating competitive business
and economy. Determining the factors that majorly affect the knowledge-sharing (KS)
concept in an organisation is critically challenging. Knowledge capitalisation and business
flourishing go hand in hand. Undoubtedly, the organisational culture (OC), being one of
the bases of organisations sustained competitive advantage (Barney, 1991), is a key
factor that ensures efficiency of a company (Deal & Kennedy, 1982; Denison, 1990).
OC is simply defined as the shared and basic assumptions that an organisation learnt
while coping with the environment and solving problems of external adaptation together
with internal integration. These are often taught to new members as the correct way to
solve those problems (Park, Ribie`re, & Schulte Jr, 2004). Conversely, the culture of excel-
lence (CoE) is considered as one of the most important kinds of OC.

Corresponding author. Email: rezaeighasem@yahoo.com

# 2015 Taylor & Francis

 2 G. Rezaei et al.

Wardell (2010) explained the meaning of CoE as the attainment of culture once the
workers in a business group systematically perform together to efficiently and effectively
achieve the aim of the organisation. Lately, the intense global business economic compe-
tition imparted further impetus towards the development of CoE conceptualisation. Con-
siderable attention to CoE philosophies and procedures are made by diverse organisations
partaking in international trade and global competition. Over the decades, CoE became
attractive to several researchers in sundry areas due to the wide acceptance of its practices
by various organisations worldwide. According to Ruuska (2005), CoE is a key indicator
to KS, where people must be connected to secure single and shared purpose that could be
achieved through a shared OC.
The Iranian Vision 2020 document prospected Iran to become the technology leader
in the entire Southwest Asia by 2020. To achieve such technological leadership, it is
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essential to cultivate and implement CoE practices. Currently, the recipient of European
foundation for quality management (EFQM) excellence award by Iranian manufacturing
companies constitutes the most significant industrial sector in the nation. These
businesses include car makers, spare part manufacturers, chemical producers, metals
manufacturing companies, and so on. A total of 550 business organisations succeeded
in receiving the EFQM award between 2003 and 2013. It is emphasised that a well-
managed CoE programme accompanied with a robust KS culture are prerequisite for
a manufacturing industry to maintain its competitiveness in accomplishing this presti-
gious award.
Ironically, the CoE is far from being executed and practised at the same pace in the
different parts of the world. Earliest implementations took place in the USA and
Europe, and later in the developing countries. However, to compete in the global
market, the developing nations need to implement CoE practices and KS across various
sections of their industries. Trivellas and Dargenidou (2009) acknowledged that studies
on organisations CoE are still very limited. Durst and Edvardsson (2012) reported
similar facts for developing countries such as Iran. In fact, most of the works on CoE
are dedicated to western nations. It is worth noting that knowledge management not
only acts as a precursor to organisational competence, but operates as a medium among
managerial constructs and efficacy. Consequently, many issues pertaining to CoE are
less pursued even though they are imperative nowadays with the advent of technological
proliferations (Antony & Bhattacharyya, 2010).
Despite numerous researches to establishing relationship between OC and organis-
ational performance (OP), systematic empirical investigation regarding the influence of
CoE practices on OP and KS behaviour in the Iranian manufacturing sector is still
lacking. A comprehensive, reliable, and valid measurement tool to determine the CoE
is far from being achieved. In this view, the present study attempts to develop and test
empirically a conceptual framework to examine the relationship between CoE and OP
by considering the mediating effect of KS. Specifically, two key issues are identified
and posed as research questions: (1) Do CoE positively contribute towards the OP of
Iranian manufacturing industries? (2) Does KS acts as a mediator between CoE and
business performance in the context of Iran?
The paper is organised as follows. The first part of the paper offers a comprehensive
literature review involving the CoE model, KS, OP, and their relationships. Second part
presents research methodology. The third part is the core of the paper which underscored
the results and discussion. Final section concludes the paper with emphasis on research
findings and suggestions for further improvements regarding how manufacturing compa-
nies in Iran should be managed.
 Total Quality Management 3

Literature review and hypothesis formulation

Culture of excellence
CoE is defined as the attained culture by the workers in a business group when they
perform together to efficiently and successfully accomplish the organisational goal
(Wardell, 2010). One of the main sub-criteria in the EFQM excellence model involves
CoE (sub criteria1D: Leaders reinforce CoE with people) (EFQM, 2010). Likewise, Her-
guner and Reeves (2000) highlighted culture as a set of routines that are continuously prac-
tised by a group of people. Repetitive exercises of good practices automatically leads to a
healthy culture. Good practices generate good culture and excellent practices create the
CoE (Hofstede, Neuijen, Ohayv, & Sanders, 1990). To become excellent, one should
strive to do something that is extraordinary from the normal endeavour. Goffee and
Jones (1998) emphasised that the employees of an organisation must develop an excep-
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tional work culture to accomplish the pinnacle of excellence. In other words, a successful
organisations employees project excellent practices and attitudes in their everyday
working environment (Rashid, Sambasivan, & Rahman, 2004). Table 1 summarises the
definition of CoE based on various parameters as described by different researchers.

CoE constructs
Over the years, the constitution of CoE is examined through several studies, where the
common barriers and factors required for the successful implementation of CoE are ident-
ified. Despite the occurrence of dissimilar CoE built up with diverse viewpoints in each
study, they still share some common attributes in the constructs owing to their universal
theoretical foundations. Table 2 enlists a comparison of CoE constructs derived from
various organisational and CoE practices.
Figure 1 illustrates the frequency of different prominent factors of CoE including
inspiring leadership (ILE), open and transparent communication (OCO), and high
degree of motivation (HMO). These three factors are specified to the highest frequency
in relation to the others. Conversely, process (P) and organisational structure (OS)
possess the lowest frequencies. The frequency of seven factors such as clear vision and
strategy (CST), highly empowered team (THE), excellent training and education (ETR),
engaging and challenging environment (EEN), strong commitment (SCT), seamless col-
laboration (SCL), and mutual trust (MTR) are weighted in the range 2550%. It
clearly shows that the majority of articles consider these issues as primary constructs of
CoE. Furthermore, some other insignificant factors falling in the low-frequency domain

Table 1. Definitions of CoE.

Author Definitions of CoE
Bin Abdul Rahman et al. CoE is the unusual good practice which becomes a normal/ routine
(2000) practice among staff in performing their daily duties
Mage (2003) A company that embraces shared expectations for high performance
Wardell (2010) The culture attained once a business group of workers work together
methodically to efficiently and effectively achieve the aim of the
organisation
Arasli (2012) The totality of the beliefs, norms, and values that switch the actions of
persons and groups in a company
Mintrom and Cheng An organisational context encouraging behaviors that, when deployed,
(2014) continuously improve task performance
 4
G. Rezaei et al.
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Table 2. Comparison of CoE constructs across different studies.

ILE OCO HMO CST HTE ETR EEN SCT SCL MTR P OS
p p
Stok et al. (2010) p p p p
Gruber (2001) p p p p
Cantey et al. (2011) p p p p p p p p
Basir et al. (2011) p p p p p p
Bettinger (1989) p p p p
Aulawi et al. (2009) p p p p
Neo (2002) p p p
Burris (2012) p p p p p p p
Sinha and Arora (2012) p p p p p
Broadfoot and Ashkanasy (1994) p p p p p p
Al-Alawi et al. (2007) p p p p p p p p
Zeitz et al. (1997) p p p p
Al-Adaileh and Al-Atawi (2011) p p p p p p
Oliver and Kandadi (2006) p p p
Moon and Lee (2014) p
Nantana (2008)
Sum 10 11 9 4 7 6 4 5 7 8 2 2
Factor frequency (%) 63 69 56 25 44 38 25 31 44 50 13 13
 Total Quality Management 5
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Figure 1. Percentage of CoE construct.

are not considered in this study as major ingredients of CoE constructs. In short, ten pre-
dominant and frequently occurring factors such as ILE, OCO, HMO, CST, HTE, ETR,
EEN, SCT, SCL, and MTR are selected as primary elements of CoE constructs. This
selection based on the comprehensive literature review and intensive preliminary study
is believed to be suitable for testing the cited hypothesis in the Iranian industrial context.

Knowledge-sharing
Certainly, KS is identified as the exchange and transmission of knowledge among persons,
clusters, and administrations. Consequently, KS improves the organisational keenness by the
operative exchange, incorporation, and collaboration of knowledge (Lawson, Petersen,
Cousins, & Handfield, 2009). Actually, KS practices facilitate workers to develop their abil-
ities and include novel information into organisational memory (Chen & Huang, 2011). KS
can be viewed as a procedure in which skills and information are transported from one indi-
vidual to another (Lin, 2007). It refers to the behaviour of an individual to distributing his or
her knowledge to other persons for solving the problems, improving new thoughts, or apply-
ing strategies or processes (Cummings, 2004). Usually, KS is employed in an organisation,
when lack of knowledge is recognised (Luo & Lee, 2015). KS contains both explicit knowl-
edge about know-why and know-what as well as the implicit knowledge regarding know-
who and know-how (Hsu, 2006). The willingness of individuals for sharing knowledge
with others that they learnt or created seems significant for accumulating capitals and to
accelerating further advancements (Bock, Zmud, Kim, & Lee, 2005).

Organisational performance
Generally, OP refers to the companys goals and achievement. It is impossible to offer excel-
lent services for the companies, in which their outcomes are not measured and improved
(Tomazevic, Seljak, & Aristovnik, in press). The success of a company can be evaluated
via varieties of performance measurements (Lam, Lee, Ooi, & Lin, 2011). According to
 6 G. Rezaei et al.

Agarwal, Erramilli, and Dev (2003), performance consists of subjective and objective parts.
Subjective performances are based on perceptions of customers and employees in measuring
results such as customer satisfaction (CS) and employee satisfaction (ES). A comparison of
different OP measures suggests the need of multiple performance indicators, including
both financial and non-financial measures. The OP is measured on the basis CS, ES, and
business result (BR) classifications (Lin, Chow, Madu, Kuei, & Pei Yu, 2005).

Relationship between CoE and OP

Denisons model offers CoE as a solution for improving OP (Denison, 1990). Sinha and Arora
(2012) utilised Denison model to investigate the relationship between OC and Business Excel-
lence. Meanwhile, culture is considered as the key factor in transforming an ordinary organ-
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isation to an excellent one (Sinha & Arora, 2012). Sharir (2013) affirmed that a company with
well-built CoE creates organisational capacity and acquires a structure that empowers,
focuses, and engages employees. ES has been considered as a significant category, especially
for the companies that recognised the value of business excellence and perceive ES as one of
the critical issues (Tomazevic, Seljak, & Aristovnik, 2014). Kotter (1992) asserted the cre-
ation of a positive correlation between managerial success and strong OC. They believed
the existence of a robust linkage between effectiveness and CoE in an organisation (Deal
& Kennedy, 1982). Following this idea, Sinha and Arora (2012) established a relation
between OC and business excellence taking the case of Navratna PSU in India.
In contrast, some researchers pointed out that implementation of OC do not improve
OP. For example, Banton (2002) revealed that despite the existence of a relationship
between OC variables and financial performance at the divisional levels, no correlation
between OC and return on sales (ROS) is realised. Consequently, the first hypothesis of
the current study becomes:
H1: CoE are positively significant and have a direct influence on OP in Iranian manufacturing
companies.

Relationship between CoE and KS

Homans (1961) proposed that information exchange between people is a fundamental
form of behaviour, which is always based on the principles of cost and benefit. According
to Bock et al. (2005), KS might be considered as a kind of social exchange with individuals
sharing their skills and knowledge with their colleagues and expecting, mutually, to obtain
others information in return. Much research has been undertaken on social exchange view
for investigating personal behaviour in KS (Bock et al., 2005; Kankanhalli, Tan, & Wei,
2005). Kankanhalli et al. (2005) applied cost/benefit examination based on the social
exchange theory to investigate motivations and inhibitory issues regarding the KS. KS
requires active interaction among individuals (Wenger, McDermott, & Snyder, 2002). It
refers not only to sharing codified information, but also images, beliefs, experiences,
and contextualised practices that are personalised information (Ambrosini & Bowman,
2001). This sharing among the members assists to develop their mutual understanding
about the organisation (Nonaka & Takeuchi, 1995). Truly, CoE is one of the main
factors that makes knowledge management and KS successful in an organisation
(Tuggle & Shaw, 2000). Al-Shammari and Musharraf (2014) demonstrated a positive
relationship between each of OC factors (trust, communication between staff, leadership,
and reward system) and KS. Meanwhile, Islam, Jasimuddin, Hasan, Burstein, and Lee
(2015) explained the role of OC on KS processes in multinational corporations
 Total Quality Management 7

(MNCs). Thus, CoE practices can be argued to be positively correlated with KS. This
results the other hypothesis of the current study:
H2a: CoE are positively significant and directly affect the KS in Iranian manufacturing
companies.

Relationship between KS and OP

It is established that a firms success is largely determined by the resources it owns and
the way it manages. It is affirmed that culture (Flamholtz, 2001) and knowledge (Teece,
2007) are the most valuable resources for some organisations. The resource-based view
of the organisation indicates that how knowledge might help to develop a competitive
advantage of an organisation. Hsu (2008) applied resource-based view to investigate the
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relationship between KS and OP. KS involves both tacit and explicit knowledge and is
important to improve OP (ODell & Grayson, 1998). In addition, KS have a positive
relationship with organisational human capital (employee competencies) that contributes
to OP (Hsu, 2008). Accordingly, Law and Ngai (2008) found that KS and learning beha-
viours led to better performance by improving the business processes, products and ser-
vices offerings to a fifo. Augusto, Lisboa, and Yasin (2014) believed that facilitating the
higher knowledge management practices improves more related innovations. Moreover,
Chuang, Chen, and Tsai (2015) in their investigation observed the individuals percep-
tions about other employees intentions to manage and share knowledge is potentially
significant for OP. Sheng and Hartono (2015) in their research concluded that the pro-
cedure of sharing and creating knowledge nourishes the following results which benefit
the organisation: it accelerates the development of new products, creates customer
acknowledgement, intensifies service and product innovation, and improves relation-
ships with partners. In addition, Jarvenpaa and Staples (2000) addressed that willing-
ness to share is positively related to profitability and productivity as well as
negatively associated to labour cost. Yao, Tsai, and Fang (2014) concluded that KS
is positively related to members e-loyalty. Therefore, the third hypothesis of the
current study is:
H2b: KS is positively significant and directly influences the OP of manufacturing companies
in Iran.

Mediating role of KS
Existing literatures are lack of enough evidence of KS functioning as a mediator between
CoE and OP. In this standpoint, the current study considers KS as mediator between CoE
and OP. Knowledge management serves not only as an antecedent to organisational effec-
tiveness, but also as a medium between organisational factors and efficacy (Zheng, Yang,
& McLean, 2010). Nevertheless, OC does not directly lend its influence on organisational
effectiveness. It rather exerts the influence through shaping the behaviour of organisations
members (Zheng et al., 2010). CoE is also a key indicator to KS (Ruuska, 2005). In turn,
organisational knowledge reflective of cultural characteristics of the business is utilised to
produce new products and services, improve efficiency, and enhance effectiveness
(Nonaka, Toyama, & Konno, 2000). Therefore, CoE is helpful for ensuring effective
and efficient KS adoption with enhanced OP. Thus, the other hypothesis of the present
study is:
H2: KS acts as a positive mediator between CoE and OP of manufacturing companies in Iran.
 8 G. Rezaei et al.

Research framework
Figure 2 depicts the proposed theoretical framework for testing the hypotheses H1 H2,
which examines the mediating effect of KS between CoE and OP. Here, CoE is considered
as independent variable together with KS and OP as dependent variable.

Methodology
This study employed quantitative research methodology using questionnaires to meet the
research objectives. Many business excellence models that are usually used in companies
has several advantages when they are applied practically (Dahlgaard, Chen, Jang,
Banegas, & Dahlgaard-Park, 2013). The EFQM Excellence model designed to help com-
panies towards more competitive condition. To test the proposed hypotheses, manufactur-
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ing companies that achieved EFQM excellence award in Iran were specifically identified
and targeted for participation. The certified organisations were chosen from the listing of
the Institute for Productivity and Human Resource Development (IPHRD). IPHRD, which
has been in operation since 2003, is the organisation responsible for awarding EFQM
prizes in Iran.
As mentioned earlier, the analysis unit of this study was the manufacturing companies.
The respondents were the chief executive officer, EFQM, or quality assurance managers
who had ample knowledge about organisational practices of CoE, OP, and KS in their
organisations. Data were collected using self-administered questionnaire-based online
survey. Web survey has been used, since it is a comparatively simple method to gather
quantitative data. A pre-test was carried out on ten operations research professors to deter-
mine the validity of the content of the survey questionnaires. This was followed by a pilot
study of 90 manufacturing companies which achieved the EFQM excellence award. The
aim of the pilot study was to evaluate the effectiveness of the questions in the question-
naire. Here, each participant was requested to assess the survey questionnaires in terms
of wordings, relevance, and clarity. Although 550 Persian questionnaires were distributed,
only 222 valid questionnaires were used in the analysis, depicting a response rate of 40%.

Figure 2. The conceptual framework of CoE with KS as the mediator.

 Total Quality Management 9

The CoE construct has the maximum number of predictors in the model, including ten
reflective indicators. Utilising the method proposed by Cohen, Cohen, West, and Aiken
(2013), a sample of 222 participants is sufficient to achieve the desired statistical
power. Data collection was carried out over a period of three months between March
2014 and July 2014. The dimensions and items to measure CoE, OP, and KS have been
adapted from the literature review and modified to suit the study context (Appendix).
For the purpose of scoring CoE, KS, and OP practices, a five-point Likert scale was
employed, with 1 meaning very low and 5 meaning very high.
The responses were later analysed using the SPSS Version 22 statistical package. In
addition, Partial Least Squares Structural Equation Modelling (PLS-SEM) method and
smartPLS software (Ringle, Wende, & Will, 2005) were utilised to test the research
hypotheses. Several academicians as well as researchers have proposed a two-stage
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model-building process for conducting SEM (Hair, Rabin, Anderson, & Black, 2010;
Lin & Lee, 2004), in which the confirmatory factor models were tested before testing
the structural model. The confirmatory factor models identify how hypothetical constructs
are measured in terms of the observed variables such as ILE. Moreover, the structural
models identify causal associations among the latent variables (Lin & Lee, 2004).
A component-based SEM technique, PLS, is deemed appropriate to conduct data
analysis in this research for several considerations. First, like other SEM techniques,
PLS has the ability to account for measurement errors of latent constructs and to simul-
taneously examine the significance of structural models. Second, PLS is appropriate for
complex models where a large set of relationships among constructs and sub-constructs
are examined (Urbach & Ahlemann, 2010). Third, compared to another widely used
SEM technique AMOS, PLS makes fewer demands regarding sample size and does not
require normal-distributed input data (Urbach & Ahlemann, 2010). In addition, Hair
et al. (2010) reported that when the model has more than seven latent constructs, and
where some of the constructs have less than three items (just identified model), the
minimum sample of 500 is needed to use the AMOS software. Thus, the AMOS software
cannot be used for data analysis in the current study due to the fact that it has much less
than 500 samples.
A model with a second-order construct (CoE and OP) can be analysed with three
different methods: the repeated indicator approach, the two-stage approach, and the
hybrid approach (Becker, Klein, & Wetzels, 2012). Due to the dissimilar number of indi-
cators for CoE across its lower-order constructs, this research used the two-stage approach
to avoid biasing the results and to achieve more reliable results (Becker et al., 2012). First,
the structural model is developed without the high-order construct and PLS algorithm is
run in smartPLS. Subsequently, the structural model is developed, and CoE dimensions
are replaced by their latent variable scores achieved in the first stage. Then, by running
the PLS algorithm, the path coefficients are estimated and by means of bootstrapping
with 2000 samples, the hypotheses are tested (Becker et al., 2012).

Data analysis and results

Respondent general descriptive statistic
There were 190 (86%) male and 32 (14%) female respondents. In addition, the majority of
respondents worked at EFQM department, accounting for 46% of the total number of
respondents. In terms of Job rank, 17% of the respondents hold senior management pos-
itions and 83% hold middle management positions. Also, 82% of the respondents can be
classified working in large companies and 18% as working in SMEs. Finally, 33% of
 10 G. Rezaei et al.

companies are certified for their commitment to excellence, 52% certified for their recog-
nition for excellence, and 15% certified by the excellence award. The results are summar-
ised in Table 3.

Measurement model
To evaluate the reliability and validity of the collected data, the exploratory factor analysis
(EFA) and the confirmatory factor analysis (CFA) were performed on CoE, KS, and OP
constructs. Here, the measurement model includes 71 items explaining fourteen con-
structs: ILE, OCO, HMO, CST, HTE, ETR, EEN, SCT, SCL, MTR, KS, ES, CS, and
BR. During the initial data screening, the researchers examined the descriptive, treatment
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Table 3. The profile of the respondents of the final survey.

General profile Frequency %
1. Gender
Male 190 86
Female 32 14
2. Age
Under 30 28 13
31 40 145 65
41 50 40 18
51+ 9 4
3. Education level
Bachelor 107 48
Master 104 47
Ph.D. and above 11 5
4. Department
EFQM 102 46
Strategy management 29 13
Quality assurance 91 41
5. Job rank
Executive/senior management 38 17
Middle management (supervisor, administrator) 184 83
6. Experience
1 5 22 10
610 55 25
11 20 117 53
More than 20 28 13
7. No. of employees
150 40 18
. 150 182 82
8. Ownership
100% public 24 11
100% private 81 36
Semipublic 117 53
9. Award
Commitment to excellence 73 33
Recognised for excellence (two star) 49 22
Recognised for excellence (three star) 41 18
Recognised for excellence four star) 25 11
Excellence award (bronze medal) 27 12
Excellence award (silver medal) 5 2
Excellence award (gold medal) 2 1
 Total Quality Management 11

of missing data, nonresponses bias, and common method bias. The factor analysis result
shows that the ratio of principal factor variance to total variance is 44.80%, which is
less than 50%, thus resulting in the conclusion that common method bias did not exist
in the study (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003).
EFA with varimax rotation was performed on the CoE constructs and OP measures. At
a minimum, a 0.4 loading of each item on its respective factor is considered adequate for
that factor. While a minimum of 0.5 loading for items that cross-load on multiple factors is
considered adequate (Ngai, Cheng, & Ho, 2004). The factor extraction method was a Prin-
cipal Component Analysis and only factors with eigenvalues . 1 were extracted and ten
factor solution was realised for CoE and three factors for OP. The EFA of 53 items of CoE
constructs yielded ten factors resulting in 73.92% of the total variance. The result indicates
that 10 CoE constructs have been identified with 42 items as compared to the original
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questionnaire, which included 53 items. Next, the EFA of 13 items of OP were loaded
on three factors explaining 63.68% of the total variance. Here, one item was recommended
to be omitted. The Kaiser Meyer Olkin Measure of Sampling Adequacy for CoE was
found to be 0.896 and 0.886 for OP, which were greater than the required merging of
0.7 (Black & Porter, 1996).
Internal consistency reliability to examine unidimensionality was assessed using the
Cronbachs a (Lin & Lee, 2005). During this validation process, eleven items the third
(SCT3) and fifth (SCT5) items of (SCT) measures; the first (OCO1) item of (OCO)
measures; the third (SCL3) and fifth (SCL5) items of (SCL) measures; the fifth (HTE5)
and sixth (HTE6) items of (HTE) measures; the second (KS2) and third (KS3) items of
(KS) measures; the second (BR2) item of (BR) measures; and the second (ES2) item of
(ES) measures were deleted due to poor factor loadings of less than 0.5 on their respective
latent variables (Hoang, Igel, & Laosirihongthong, 2006). The Cronbachs a measure of
reliability for CoE constructs, KS, and OP constructs were between 0.695 and 0.827.
According to Kline (2011), the accepted lower value of Cronbachs a is 0.70; however,
Nunnally and Bernstein (1994) allowed a slightly lower minimum limit such as 0.6 for
exploratory work involving the use of newly developed scales. Composite reliability (CR)
is considered as a more rigorous estimate of reliability than Cronbachs a (Chin, 1998a).
A CR of 0.70 or greater is acceptable (Fornell & Larcker, 1981), which shows that the
measurements are reliable. Table 4 shows the measurement model reliability and validity.
Since Cronbachs a value for each factor is above 0.60 and the CR is above 0.70, all
factors are accepted as being reliable for the research.
In addition, CFA is conducted to evaluate convergent and discriminant validity of the
constructs in the research model. Convergent validity, defined by (Sadikoglu & Zehir,
2010) as the agreement of items that measure the same construct, was evaluated by exam-
ining the factor loading within each construct and average variance extracted (Hair et al.,
2010). By conducting CFA using PLS, all item loadings and their t-values are reported in
Table 4. The loadings of all items exceeded the recommended value of 0.5. Also average
variance extracted (AVE) for all constructs are above 0.5, indicating that latent constructs
can account for at least 50% of the variance in items and the measurement scale has adequate
convergence validity (Hair, Anderson, Tatham, & William, 2006).
Discriminant validity refers to the degree to which measures of different constructs are
distinct. Two measures of discriminant validity have been proposed. One of these methods
is. Discriminant validity could be assessed by comparing square root of AVE for each con-
struct with its correlations with other constructs (Chin, 1998a). (Note: This criterion can
also be stated as one in which the AVE should exceed the squared correlation with any
other construct.) As shown in Table 5, the AVE for each construct is greater than the
 12 G. Rezaei et al.

Table 4. Measurement model reliability and validity.

Item Original Sample Standard t Cronbachs Composite
loading sample mean error Statistics a AVE reliability
SCL 0.769 0.59 0.852
SCL1 0.751 0.751 0.031 24.167
SCL2 0.786 0.783 0.029 26.817
SCL4 0.796 0.795 0.027 29.852
SCL6 0.740 0.742 0.038 19.654
OCO 0.695 0.621 0.831
OCO3 0.767 0.765 0.033 23.146
OCO4 0.770 0.771 0.030 25.471
OCO5 0.827 0.826 0.019 42.632
EEN 0.732 0.65 0.848
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EEN2 0.825 0.823 0.024 33.793

EEN4 0.802 0.800 0.028 29.128
EEN5 0.794 0.793 0.026 30.868
ILE 0.827 0.66 0.885
ILE1 0.810 0.810 0.023 35.193
ILE2 0.833 0.831 0.020 41.452
ILE3 0.793 0.794 0.022 36.750
ILE4 0.808 0.807 0.026 31.530
HMO 0.701 0.63 0.834
HMO1 0.797 0.797 0.029 27.100
HMO3 0.780 0.779 0.033 23.344
HMO4 0.796 0.795 0.030 26.734
SCT 0.802 0.63 0.87
SCT1 0.765 0.763 0.030 25.618
SCT2 0.824 0.824 0.024 34.843
SCT4 0.792 0.791 0.027 28.823
SCT6 0.786 0.784 0.030 26.478
CST 0.791 0.62 0.865
CST1 0.839 0.838 0.017 48.130
CST2 0.751 0.748 0.028 26.417
CST3 0.758 0.760 0.030 25.627
CST4 0.789 0.788 0.029 26.778
HTE 0.744 0.57 0.839
HTE1 0.803 0.802 0.026 31.310
HTE2 0.733 0.733 0.033 21.982
HTE3 0.740 0.740 0.032 22.836
HTE4 0.732 0.729 0.041 17.882
ETR 0.743 0.66 0.853
ETR1 0.839 0.840 0.029 28.813
ETR4 0.792 0.790 0.028 28.457
ETR5 0.806 0.807 0.024 33.385
MTR 0.745 0.66 0.854
MTR1 0.818 0.815 0.028 29.416
MTR2 0.806 0.804 0.027 29.654
MTR4 0.815 0.813 0.027 29.772
KS 0.727 0.65 0.846
KS1 0.846 0.845 0.019 44.561
KS4 0.779 0.779 0.029 26.551
KS5 0.787 0.785 0.030 26.586
BR 0.747 0.57 0.841
BR1 0.805 0.803 0.030 27.054

(Continued)
 Total Quality Management 13

Table 4. Continued.
Item Original Sample Standard t Cronbachs Composite
loading sample mean error Statistics a AVE reliability
BR3 0.700 0.697 0.042 16.767
BR4 0.747 0.746 0.034 22.132
BR5 0.763 0.762 0.030 25.344
CS 0.75 0.67 0.857
CS1 0.795 0.794 0.026 30.131
CS2 0.825 0.825 0.021 39.778
CS3 0.829 0.828 0.021 39.116
ES 0.757 0.67 0.861
ES1 0.864 0.862 0.021 40.671
ES3 0.834 0.832 0.021 40.477
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ES4 0.761 0.759 0.032 23.751

squared correlations of other constructs which implies adequate discriminant validity

(Fornell & Bookstein, 1982). Another method for assessing discriminant validity is by
examining the cross loadings of the indicators. Specifically, an indicators outer loading
on the associated construct should be greater than all of its loadings on other constructs
(i.e. the cross loadings) (Chin, 1998a). Table 6 indicates that all outer loadings of the
associated factor are larger than all of its loadings with other constructs. Thus, discrimi-
nant validity of the measurement instrument is validated. Table 7 summarises all the find-
ings based on the analysis of the measurement model for overall assessment on the validity
and reliability of measurement scales by EFA, reliability test and CFA.

Analysis and result of structural model

After achieving satisfactory results, and based on the reliable and validated instruments,
the studys specific research hypotheses were tested. In the following section, the proposed
structural model is tested by using PLS to estimate the magnitude and significance of path
coefficients. In this study, four hypotheses were developed in order to answer the research
questions put forward in the current study. These hypotheses were grouped into two main
categories as follows: (1) The relationship between CoE and OP and (2) The mediating
effect of KS.

The relationship between CoE and OP

In this analysis, the author seeks to answer the following questions:

. Do CoE contribute to OP?

In this study, CoE is assessed using ten distinct reflective constructs. In addition, OP is
assessed using three distinct reflective constructs: BR, CS, and ES. Second-order factor
was used to examine the relationship between CoE and OP using the structural model.
Figure 3 and Table 8 present the results of the structural equation model estimation,
including standardised path coefficients and t statistics obtained from PLS analysis. The
standard errors were computed by using the bootstrap resampling method with 500 resam-
ples. Here, the R2 values indicate that the model explains a substantial amount of variance
among the dependent variables. Hair (2010) emphasised the use of a one-tailed test for
 14
G. Rezaei et al.
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Table 5. Correlation matrix of constructs.

BR SCL OCO CS ES EEN KS ILE HMO SCT CST HTE MTR ETR
BR 0.57
SCL 0.40 0.59
OCO 0.39 0.43 0.54
CS 0.33 0.36 0.43 0.67
ES 0.38 0.47 0.44 0.44 0.67
EEN 0.34 0.40 0.47 0.40 0.47 0.65
KS 0.48 0.53 0.52 0.48 0.50 0.49 0.65
ILE 0.41 0.43 0.42 0.36 0.41 0.36 0.51 0.66
HMO 0.27 0.32 0.33 0.28 0.28 0.31 0.40 0.32 0.63
SCT 0.39 0.47 0.41 0.47 0.56 0.49 0.52 0.34 0.27 0.63
CST 0.37 0.42 0.34 0.36 0.39 0.32 0.51 0.51 0.39 0.34 0.62
HTE 0.40 0.43 0.51 0.41 0.42 0.42 0.54 0.43 0.43 0.46 0.39 0.57
MTR 0.32 0.44 0.34 0.35 0.43 0.31 0.41 0.39 0.19 0.46 0.29 0.46 0.66
ETR 0.31 0.39 0.31 0.28 0.37 0.38 0.40 0.38 0.32 0.36 0.38 0.38 0.33 0.66
 Table 6. Results of validity cross loadings.
BR SCL OCO CS EP EEN KS ILE HMO SCT CST HTE ETR MTR
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BS1 0.80 0.52 0.41 0.42 0.47 0.43 0.56 0.55 0.42 0.50 0.48 0.46 0.47 0.44
BS3 0.70 0.51 0.46 0.50 0.50 0.53 0.57 0.50 0.38 0.50 0.44 0.51 0.35 0.49
BS4 0.75 0.40 0.42 0.39 0.40 0.34 0.45 0.40 0.31 0.41 0.43 0.48 0.43 0.40
BS5 0.76 0.45 0.44 0.43 0.50 0.45 0.51 0.46 0.44 0.47 0.47 0.47 0.42 0.38
SCL1 0.46 0.75 0.52 0.44 0.47 0.45 0.54 0.42 0.44 0.46 0.46 0.45 0.42 0.47
SCL2 0.53 0.79 0.45 0.44 0.52 0.48 0.57 0.51 0.43 0.58 0.50 0.56 0.57 0.60
SCL4 0.48 0.80 0.55 0.51 0.63 0.53 0.60 0.57 0.48 0.59 0.57 0.50 0.51 0.55
SCL6 0.46 0.74 0.47 0.45 0.46 0.47 0.53 0.51 0.39 0.46 0.46 0.51 0.40 0.39
OCO3 0.41 0.49 0.77 0.49 0.50 0.52 0.57 0.51 0.48 0.45 0.48 0.55 0.41 0.40
OCO4 0.49 0.48 0.77 0.52 0.51 0.55 0.53 0.48 0.44 0.44 0.44 0.52 0.46 0.40
OCO5 0.46 0.57 0.83 0.49 0.52 0.55 0.58 0.55 0.45 0.51 0.48 0.53 0.46 0.48
CS1 0.49 0.50 0.53 0.79 0.50 0.51 0.57 0.58 0.46 0.56 0.56 0.58 0.50 0.52
CS2 0.46 0.53 0.52 0.82 0.58 0.52 0.56 0.46 0.43 0.59 0.48 0.47 0.42 0.45
CS3 0.46 0.45 0.49 0.83 0.55 0.53 0.57 0.43 0.40 0.52 0.43 0.50 0.36 0.48
ES1 0.56 0.57 0.61 0.59 0.86 0.59 0.59 0.57 0.44 0.62 0.50 0.57 0.49 0.54
ES3 0.50 0.56 0.54 0.58 0.83 0.57 0.58 0.50 0.43 0.70 0.50 0.52 0.51 0.54
ES4 0.45 0.55 0.45 0.45 0.76 0.54 0.57 0.49 0.42 0.52 0.52 0.51 0.50 0.54
EEN2 0.48 0.54 0.56 0.54 0.52 0.82 0.60 0.51 0.45 0.53 0.51 0.55 0.49 0.43
EEN4 0.49 0.50 0.56 0.52 0.60 0.80 0.53 0.53 0.46 0.59 0.45 0.54 0.52 0.52

Total Quality Management

EEN5 0.45 0.48 0.53 0.48 0.54 0.79 0.55 0.40 0.43 0.57 0.41 0.48 0.50 0.40
KS1 0.59 0.61 0.64 0.59 0.55 0.57 0.85 0.67 0.54 0.62 0.61 0.63 0.52 0.55
KS4 0.50 0.57 0.55 0.55 0.58 0.56 0.78 0.49 0.48 0.55 0.56 0.57 0.47 0.48
KS5 0.57 0.57 0.53 0.53 0.58 0.56 0.79 0.57 0.51 0.58 0.56 0.58 0.54 0.52
ILE1 0.52 0.56 0.49 0.47 0.54 0.50 0.61 0.81 0.44 0.52 0.55 0.52 0.47 0.55
ILE2 0.54 0.57 0.58 0.53 0.53 0.53 0.63 0.83 0.49 0.49 0.61 0.55 0.54 0.50
ILE3 0.48 0.52 0.53 0.52 0.52 0.46 0.55 0.79 0.45 0.45 0.59 0.53 0.49 0.54
ILE4 0.53 0.48 0.52 0.41 0.48 0.44 0.54 0.81 0.46 0.43 0.56 0.52 0.50 0.43
HMO1 0.39 0.42 0.43 0.43 0.42 0.42 0.51 0.46 0.80 0.40 0.48 0.48 0.48 0.27
HMO3 0.43 0.43 0.50 0.42 0.42 0.42 0.49 0.42 0.78 0.40 0.49 0.53 0.43 0.32
HMO4 0.41 0.49 0.44 0.40 0.40 0.48 0.51 0.46 0.80 0.43 0.51 0.54 0.44 0.43

15
(Continued)
 16
G. Rezaei et al.
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Table 6. Continued.
BR SCL OCO CS EP EEN KS ILE HMO SCT CST HTE ETR MTR
SCT1 0.44 0.44 0.39 0.45 0.57 0.46 0.50 0.41 0.37 0.76 0.38 0.45 0.40 0.49
SCT2 0.53 0.57 0.49 0.55 0.62 0.58 0.61 0.49 0.39 0.82 0.46 0.61 0.48 0.54
SCT4 0.54 0.53 0.47 0.63 0.58 0.61 0.54 0.48 0.45 0.79 0.49 0.58 0.49 0.57
SCT6 0.47 0.62 0.53 0.52 0.60 0.55 0.63 0.47 0.43 0.79 0.50 0.50 0.53 0.54
CST1 0.50 0.52 0.49 0.53 0.52 0.45 0.58 0.56 0.50 0.51 0.84 0.54 0.52 0.50
CST2 0.44 0.48 0.42 0.48 0.47 0.41 0.51 0.60 0.49 0.42 0.75 0.48 0.47 0.41
CST3 0.48 0.49 0.48 0.43 0.47 0.47 0.61 0.55 0.50 0.46 0.76 0.49 0.49 0.40
CST4 0.48 0.55 0.46 0.44 0.48 0.46 0.54 0.54 0.48 0.44 0.79 0.44 0.46 0.39
HTE1 0.54 0.49 0.61 0.57 0.53 0.59 0.62 0.56 0.50 0.61 0.49 0.80 0.50 0.52
HTE2 0.47 0.53 0.46 0.46 0.44 0.39 0.52 0.51 0.46 0.45 0.41 0.73 0.40 0.57
HTE3 0.46 0.46 0.51 0.41 0.47 0.49 0.51 0.47 0.48 0.47 0.46 0.74 0.46 0.51
HTE4 0.44 0.50 0.44 0.47 0.50 0.48 0.55 0.44 0.54 0.51 0.51 0.73 0.48 0.45
ETR1 0.47 0.49 0.50 0.45 0.46 0.55 0.57 0.52 0.47 0.52 0.51 0.56 0.84 0.52
ETR4 0.37 0.49 0.36 0.34 0.45 0.42 0.43 0.47 0.45 0.39 0.52 0.42 0.79 0.38
ETR5 0.50 0.54 0.50 0.47 0.58 0.53 0.53 0.51 0.46 0.54 0.47 0.50 0.81 0.48
MTR1 0.41 0.49 0.37 0.41 0.49 0.40 0.46 0.44 0.26 0.52 0.36 0.52 0.41 0.82
MTR2 0.46 0.53 0.45 0.50 0.52 0.44 0.50 0.46 0.33 0.52 0.42 0.56 0.42 0.81
MTR4 0.51 0.59 0.49 0.51 0.58 0.51 0.58 0.60 0.45 0.61 0.52 0.58 0.55 0.81
 Total Quality Management 17
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Figure 3. Relationship between CoE and OP.

Table 7. Summaries of EFA, reliability and CFA results.

Before analysis After analysis
Remark
Analysis CoE OP KS CoE OP KS
Reliability a . 0.7 a . 0.7 a . 0.7
Acceptable
EFA 10 factors 3 factors 10 factors 3 factors
11 items for
53 items 13 items 42 items 12 items CoE and
1 item for
OP have
been
eliminated
CFA 10 factors 3 factors 1factor 10 factors 3 factors 1factor 8 items for
multiple 42 items 12 items 5 items 34 items 10 items 3items CoE,
factors 2 items for
OP and
2 items for
KS have
been
eliminated

testing paths in the structural model. With this method, the standardised rc of the relation-
ship between CoE and OP was 0.884 as shown in Table 8. Based on the path analysis, the
hypothesis H1 was supported, given the fact that the R2 value was 0.782, suggesting that
78% of the variance in OP can be explained by CoE. The result further showed a positive
and significant relationship (standardised rc 0.884, t-value 54.724, p , .01) between
the extent of CoE and OP. The following suggested values for low, medium, and high
effects of rc based on Cohen (1988): (1) rc . 0.01: Small effect; (2) rc . 0.03: Moderate
effect; and (3) rc . 0.50: High effect. Hence, the CoE practice shows a strong and
 18 G. Rezaei et al.

Table 8. Results of testing hypothesis H1.

No Hypothesis Link in the model Standardised estimate (rc) R2 t-Value Result

1 H1 CoEOP 0.884 0.782 54.724 Supported

p , .05.

p , .01 (one-tailed test).

significant effect, which contributed to the OP (Cohen, 1988), thus supporting the respect-
ive hypothesis.
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Analysing the effect of KS as mediator

In this analysis, the researcher seeks to answer the following research question:

. Does KS act as a mediator between CoE and OP in the context of Iran?

KS as a mediating variable was included into the model as shown in Figure 4. Here, the
second-order factor was used to examine the mediation role of KS between CoE and OP.
Figure 5 shows the relationship between CoE and OP without any mediator. Table 9, on
the other hand, shows that the relationship between CoE and OP was reduced when KS
was introduced into the model, but the relationship was still significant with rc from
0.892 (t-value 63.279, p , .01) to 0.763 (t-value 14.661, p , .01). As shown in
Figure 4, CoE has a positive effect on KS. The impact of CoE on KS is significant,
which is in support of Hypothesis 12a (standardised rc 0.860, p , .01). The result
also showed that KS has a significant and direct effect (DE) on OP with rc 0.150 (t-
value 2.726, p , .01), which is in support of Hypothesis 12b. Thus, it can be included

Figure 4. Mediator testing for KS between CoE and OP.

Figure 5. Relationship between CoE and OP (without mediator).

 Total Quality Management 19

Table 9. Mediator testing for KS between CoE and OP.

Link in the Standardised Standard t
No. Hypothesis model estimate (rc) error Statistics Result Remark
1 H1 CoEOP 0.892 0.014 63.279 Supported Without KS
2 H1 CoEOP 0.763 0.052 14.661 Supported With KS
H2a CoEKS 0.860 0.017 49.773 Supported With KS
H2b KSOP 0.150 0.055 2.726 Supported With KS

p , .05.

p , .01(one-tailed test).

Table 10. Direct effect and indirect effect of KS as mediator.

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Standardised
No. Effect Link in the model estimate (rc) Result Remark
1 Direct effect CoEOP 0.763 Supported
2 Indirect effect CoEKSOP 0.129 Supported Moderate effect
Total effect CoEKSOP 0.892
Note: IE 0.01(Low); IE 0.09. (Moderate); IE 0.250(High).

that KS partially mediate the relationship between CoE and OP. In order to test whether
KS was an important mediator between CoE and OP, the following suggested the indirect
effect (IE) values (Cohen, 1988): (1) IE . 0.01: low effect; (2) IE . 0.09: moderate
effect; and (3) IE . 0.250: high effect. Table 10 shows that the standard IE of the CoE
to OP was 0.129, which can be categorised as depicting a moderate mediating effect
(Cohen, 1988). On the other hand, Hair (2010) suggested that (1) IE , 0.085: Non
mediator; (2) IE . .0.085 and IE , DE: partial mediator (CoEOP relationship, p ,
.05); and (3) IE . 0.085 and IE .. DE: total mediator (CoEOP relationship, p .
.05). Table 10 shows that the standard IE of CoE on OP is 0.129, which is more than
0.085. Thus, KS partially mediates the relationship between CoE and OP.

Discussion
The relationship between CoE and OP
The objective of this section is to answer the following question:

. Do CoE contribute to OP in Iranian manufacturing companies?

One of the main objectives of this research is to determine whether CoE contribute to
OP in Iranian manufacturing companies. The correlation between CoE and OP is indeed
justified by the SEM result. It is demonstrated that CoE significantly and positively impact
OP, thus supporting the positive argument for the relationship as mentioned in the
literature review. Truly, this observation is consistent with other findings (Deal &
Kennedy, 1982; Kotter, 1992; Sinha & Arora, 2012). Additionally, Zheng et al. (2010)
demonstrated a positive relationship between OC and OP in mid-western metropolitan
area (rc 0.52, p , .01).
 20 G. Rezaei et al.

However, Banton (2002) in a study conducted in the USA acknowledged that although
a relationship between financial performance and OC variables exists, but there is no
relationship between ROS and OC. In the present research, the rc between CoE and OP
correlation is determined to be 0.884 and R2 is found to be 0.782, which can be categorised
as a high impact (Cohen, 1988). Furthermore, it is demonstrated that CoE play a significant
role in determining OP by accounting 78.0% of the variance.

The mediating impact of KS

This section aims to answer the following research question:

Does KS act as a mediator between CoE and OP in Iranian manufacturing

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.
companies?

In the previous section, the discussion proved that CoE had a strong impact on OP with
rc 0.884 and R2 0.782. Next, this section discusses the mediator analysis between
CoE and OP. According to Baron and Kenny (1986), mediator approach focuses to ident-
ify mechanism as a process between CoE and OP, besides direct impact of CoE towards
performance. Mediator functions to explain how or why the relationship happened
between CoE and OP (Baron & Kenny, 1986). The structural relationships in the structural
models were used to test the mediating effect. The results showed that KS mediated the
relationship between KS and OP in manufacturing companies in Iran as KS had a signifi-
cant and positive impact on the OP, as shown in Table 11. Thus, KS can explain the
relationship between CoE and OP, that is, how to achieve OP through implementing
CoE. However, the mediator test showed partial mediation, which shows that the KS
alone did not completely explain the relationship between CoE and OP. The reason was
that there were various factors that contributed to the OP.
First, the organisation has to implement CoE constructs (ILE, OCO, HMO, CST, HTE,
ETR, EEN, SCT, SCL, and MTR) in their routine job as an input. Next, the company has
to implement KS as a process, which will ultimately increase the OP as an output.
Several researchers all over the world have been investigated about this topic. In agree-
ment with this finding, Nonaka et al. (2000) have suggested that KS mediate the relation-
ship between OC and OP. Additionally, findings of a study conducted in Korea by Moon
and Lee (2014) showed that knowledge-sharing processes act as mediators in the effect of
trust, collaboration, and learning as OC factors on knowledge management effectiveness.
Meanwhile, Islam et al. (2015) explained the role of OC on KS processes in MNCs based
in Malaysia. Hsu (2008) in his study in Taiwan found that organisational KS practices have
a positive relationship with organisational human capital (employee competencies), which
have a positive relationship with OP. Law and Ngai (2008) performed a study in Hong

Table 11. Mediator testing for KS.

Link in the model Standardised estimate (rc) Standard error t Statistics Result
CoEOP 0.763 0.052 14.661 Supported
CoEKS 0.860 0.017 49.773 Supported
KSOP 0.150 0.055 2.726 Supported

p , 0.05.

p , 0.01 (one-tailed test).
 Total Quality Management 21

Kong and found that KS is significantly associated with Business Process Improvement (rc
0.506, t 8.2706) and OP (rc 0.2900, t 2.7185). Furthermore, Zheng et al. (2010)
in his research over the mid-western metropolitan area found that OC (rc 0.88, p , .01)
were positively related to knowledge management. Knowledge management (rc 0.52, p
, .01) and OC (rc 0.52, p , .01) demonstrated a positive relationship with organis-
ational effectiveness. It is important to mention that our model results achieved better cor-
relation compared to the existing findings. Therefore, the researcher concluded that
knowledge management fully mediates the impact of OC on OP. However, results of
the current work were found to be inconsistent with the finding of the earlier researchers
in the same filed and in Malaysia (Ooi, Cheah, Lin, & Teh, 2012).
This study showed that KS must be implemented to obtain higher OP such as quality,
employee satisfaction, and financial performance. It was expected that KS was a mediator
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between CoE and OP. In summary, the author concluded that adoption of KS in a routine
job is an important element to improve OP.
According to Baron and Kenny (1986), IE is used to measure the extent of the
mediation effect. In this study, IE of KS was compared and the results showed that IE
was 0.129. Thus, KS can be categorised as having a moderate mediating effect (Cohen,
1988).

Conclusion and implications

The aims of this study have been successfully achieved. Specifically, the rigorous theor-
etical, methodological, and analytical contents of this empirical research have contributed
to the existing literature on CoE and OP. This study has filled in the knowledge gap and
provided a solid foundation and also opened new opportunities for future studies. The
investigation has proved that CoE has significant and positive relationship towards OP
with KS as the mediator. Finally, it is hoped that the Iranian manufacturing practitioners
can use the findings of this study for improving their performance based on identification
of the companies strengths and weaknesses.

Theoretical implications
The current study contributes to the theoretical implications for knowledge enhancement
in the OC and knowledge management. First, this study has extended the research into the
area of manufacturing companies performance, particularly in a developing country, Iran.
Second, the study has developed a research model to assess not only the impact of CoE
towards OP, but also the impact of KS as the mediator between CoE and OP. In this
way, the research has connected three theories, namely Denison model, social exchange
view, and resource-based view in examining the impact of CoE and OP in developing a
CoE performance model. The social exchange view and resource-based view were
applied as mediators to provide extensions to the resource-based view and empirical evi-
dence of their relationships. The combination of the three theories resulted in a more com-
prehensive understanding of the CoE performance model.

Managerial implications
This study has some managerial implications from its empirical evidence and validation,
which would make it generally applicable in manufacturing companies in Iran. Several
important implications in terms of practices emerged from the results of the research.
 22 G. Rezaei et al.

First, although OC is highly emphasised in the culture literature, OC alone may not create
a better performance in the manufacturing companies. The result shows that if CoE
implementation is coupled with KS in synergies, then the CoE in the manufacturing com-
panies will achieve better performance. Managers may not realise an increased perform-
ance from a successful CoE, but when CoE is implemented alongside KS, better OP can be
achieved. Iranian manufacturing companies have proved that they could achieve better OP
through implementing KS as an important practice in their organisations.
These findings have proved that CoE has a significant impact on OP, thus giving con-
fidence to the industry players to implement CoE in their organisations. The findings will
serve as a motivating factor to managers to invest in time and resources such as financial
resources and training in CoE implementation. Moreover, the studys findings also pro-
vided a better understanding of the importance of CoE in improving OP. The effective
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CoE implementation will reduce cost of improvement, generate better performance, and
eliminate loss of improvement failure. As such, the findings are expected to benefit
both researchers and practitioners. Specifically, it will help Iranian manufacturing compa-
nies in their effort to become more effective and competitive in the global market. There-
fore, CoE can be used more confidently as a strategic weapon by manufacturing
organisations to build their competitive edges and to sustain their competitiveness in
the global market. In addition, this study contributed by creating a valid and reliable
measurement instrument of CoE. This new scale can be used as an instrument in relation-
ship research related to CoE in the future field studies conducted by researchers. Finally,
the findings of the structural model, which integrate CoE, KS, and OP, are expected to
assist managers and practitioners in the manufacturing companies in terms of practical
significance.

Research limitations and future research

Before discussing the research implications, the limitations of the current study should be
noted in order for them to be considered for future research. First, this study was done in
the manufacturing sector in Iran. Thus, it is vital to it in other sectors of the economy as
well as in other countries of the world in order to afford better generalisation of results.
Second, this survey was based on cross-sectional data, which used samples at one specific
point in time. Thus, future researchers may conduct longitudinal studies based on long-
term observations or interviews regarding CoE and OP over a period of time to determine
the consistency of CoE impact. Another limitation of the current study is its scope. The
scope of this research is limited to the relationship between CoE, KS, and OP in the
Iranian manufacturing companies. The structural model showed that R2 78%, which
means that 78% of OP variance was accounted for by CoE and KS. It indicated that
over 22% was accounted by unexplained factors, which may also be explored in future
researches. There may be other critical factors influencing manufacturing companies in
their drive to achieve CoE and OP. Additionally, some moderators may be used to test
the conceptual model. For example, the moderating effects of contextual factors such as
company size and type of EFQM certification can be investigated to evaluate their
impact on the relationships. Moreover, the author suggests using contingency factors
such as environment and mechanistic factors to test whether the proposed model can
work in different contingency factors. For example, to test the rigorousness of the pro-
posed model, a comparative study can be done between the developed and developing
countries as moderators, given their different environmental settings. Another source of
potential weakness of this research is the subjective data, that is, perceptual measures of
 Total Quality Management 23

all the variables. Perceptual measures might have differences between individuals and
organisations. Objective data such as profit ratio are more accurate compared to subjective
data. In addition, single source data were used to collect the data from respondents, which
can lead to common method bias, thus affecting the actual relationships. The self-report
method, which was used to collect the data, may lead to the common method variance
a situation in which the relationships might be higher than the true relationships
among the variables. This research recommends dividing the questionnaire into half or
more, which will then be completed by finance manager and quality assurance manager
or by multiple participants.

Disclosure statement
No potential conflict of interest was reported by the authors.
Downloaded by [Orta Dogu Teknik Universitesi] at 16:18 16 January 2016

Funding
The authors would like to thank the Ministry of Education (MOE) for the financial support and the
Universiti Teknologi Malaysia (UTM) for funding to this work through International Doctoral Fel-
lowship (IDF) funding number UTM.J.10.01/13.14/1/128 (201202M10143) and UTM.J.10.01/
13.14/1/128 (201202M10062).

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Appendix. Survey questionnaire

Survey on CoE practices and OP

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