Why is quality improving continuously? An integrated perspective of institution theory and the resource-based view of the firm

Abstract

In this paper, we seek to answer a fundamental question: Why is quality improving continuously? Quality improvement is a goal that firms always pursue. Previous research on quality improvement centred mostly on total quality management (TQM), which emphasises a customer-oriented activity that relies on continuous devotion to quality improvement throughout a whole company. Yet, the mechanism of quality improvement is not well understood. This article draws on an integrated perspective of institutional theory and the resource-based view of the firm, highlighting the importance of resource exploitation based on an institution. We further argue that a hereditary institution can facilitate trust development, which in turn results in an advantageous endogenous resource, i.e., self-reinforcing human capital, supporting continuous quality improvement. To examine this argument, we draw on a case study of Largan Precision, the world's largest aspherical optical plastic lens supplier, to illustrate its successful mechanism of quality improvement. Finally, conclusion and implications for theory and practice are presented.

Keywords:

• institution
• resource
• human capital
• trust
• quality improvement