Integrated management systems maturity: Drivers and benefits in Indian SMEs

Highlights

• IMS maturity leads to better operational performance.

• Intrinsic motivation to implement IMS leads to higher IMS maturity in SMEs.

• Extrinsic motivation to implement IMS has a negative impact on IMS maturity in SMEs.

• Challenges to implementing IMS are negatively associated with the IMS maturity level.

Abstract

This study aims to assess the impact of the antecedents of Integrated Management System (IMS) implementation on the IMS maturity and its subsequent impact on operational performance in the context of Indian Small and Medium Enterprises (SMEs). Using Theory of Planned Behavior, this study develops research hypotheses linking challenges and motivation to implement IMS with IMS maturity and its impact on operational performance. Using Structural Equation Modelling to analyze the primary data collected from 144 SMEs in India, this study finds that intrinsic motivation drives firms towards higher levels of maturity while extrinsic motivation for implementation leads to lower levels of IMS maturity. This study not only empirically evaluates a comprehensive framework on IMS maturity but also contributes to growing literature on analysis of Developing Economy SMEs. The findings of this research may drive SMEs to focus on IMS maturity, as the results suggest that it is positively related to operational performance.

Introduction

In this ever-growing competitive market, high quality standards and environmental performance have become order qualifying attributes for firms across the world. To manage such pressures, firms have been adopting various Management Systems which are a set of interacting elements of an organization to establish policies and objectives, and processes to achieve those objectives (ISO 9000:2015). A firm’s management system may address a single discipline or several disciplines, such as a Quality Management System (QMS), an Environmental Management System (EMS) and Health and Safety Management System (ISO 9000: 2015). Further, management standards refer to the documents that state the requirements and guidelines to be followed in establishing and following a particular management system (ISO, 2018). Unfortunately, firms interested in implementing management systems are burdened by the presence of innumerable standards and various standardization bodies. In the world of mushrooming management system standards, there might be at least one management system standard for each stakeholder (Karapetrovic, 2002).

International Organization for Standardization (ISO) provides the most widely accepted quality and environmental management certifications, among other things (Vivanco et al., 2019). ISO 9001:2015, details the conditions for establishing a QMS. QMS came into existence owing to the necessity to control product quality and to establish standard procedures and routines in order to ensure the quality of operations in the firm. Similarly, the objective of an EMS is, therefore, to introduce firms to a systematic method of managing environmental activities and to develop services and products. This aid firms in reducing industrial environmental footprint to sustainable levels (bib_Mazzi_2020Mazzi, 2020a, Mazzi, 2020b; Hoekstra and Wiedmann, 2014). Thus, EMS helps in achieving better environmental performance which not only improves business performance (Mazzi et al., 2016a, Mazzi et al., 2016b) but also leads to sustainable material system (Olivetti and Cullen, 2018) and supply chain performance (Büyüközkan and Karabulut, 2018; Rourke, 2014). The recently updated versions of ISO 9001:2015 and, ISO 14001:2015 follows a common high-level structure (HLS) and promotes integrations with other systems.

Referring to ISO 9001, ISO 14001, and OHSAS 18001, the Chairman and CEO of SatiStar Corp. quoted¹:

“Traditionally, the big three certifications are handled separately by different groups within the organization … This is despite the fact that 65 percent of the compliance process is the same for each standard, creating a huge and unnecessary amount of redundant activity.”

Given the presence of numerous industry-specific standards, to achieve efficiencies in operations by leveraging commonality, the concept of an Integrated Management System (IMS) has gained prevalence (Velcu, 2010). Firms with multiple management systems in place, consider IMS as an efficient way to manage them and in turn to exploit related synergies (Wiengarten et al., 2017; Karapetrovic and Casadesús, 2009; Douglas and Glen, 2000).

Despite the presence of similar HLS in the recently updated management systems, the process of integration of these systems are not similar across the different sized organizations. Best practices and policy suggestions in the domain of IMS cannot be extended to Small and Medium Enterprises (SMEs) as they possess different characteristics in practice (Llonch et al., 2018). The mismatch in the policy-making procedure, organizational structure, and employment of resources exist to the extent that the implementation of larger enterprise concepts directly to SMEs might even lead to negative consequences (Welsh and White, 1981).

SMEs play an important role in contributing towards the macro-economic wellbeing of nations across the world as they account for a high proportion of jobs, industries, and GDP, especially in emerging economies (Chakraborty et al., 2019). For instance, SMEs in India account for 95% of the industrial units, 45% of the industrial output, 40% of export and around 38% of the GDP (MSME annual report, 2015). Owing to the stiff competition from large multinational corporations and ever-changing business settings, SMEs invest in management systems to improve customer satisfaction, improve innovativeness and productivity (Sadikoglu and Zehir, 2010), change the culture (Prajogo and McDermott, 2005) and thus gain sustained competitive advantage (Curkovic et al., 2000).

However, our primary investigation has revealed that the procedures of IMS implementation varied across SMEs resulting in differential levels of integration of the management systems in SMEs (Llonch et al., 2018; Abad et al., 2014). Also, various constraints, strategy used for integration or the particular order in which management systems have been integrated (Labodová, 2004; Karapetrovic, 2002), motivation (Rebelo et al., 2014a; Zeng et al., 2007) and challenges faced while implementing IMS (Simon and Douglas, 2013; Fresno, 2010) condition the level of integration of management systems. The extent to which different elements of various management systems are integrated, also known as the IMS maturity level, has an impact on the operational performance of the firm (Bernardo et al., 2012).

Owing to the importance and unique characteristics of SMEs and the importance of IMS in SMEs, we explore answers for the following research questions (RQ):

RQ1: What factors impact the IMS Maturity of SME Firms?

RQ2: What is the impact of IMS Maturity on the Operational Performance of SME Firms?

While IMS is not a new concept, an in-depth investigation on this topic remains unexplored and under-researched, especially in developing country SMEs (Llonch et al., 2018; Ballester and Simon, 2017). Extant literature also did not explore a comprehensive framework involving motivation, challenges, and benefits of IMS maturity (Gianni et al., 2017; Khanna et al., 2010). Table 1² below indicates the extent of research on this topic and the gaps that we fill by studying the impact of antecedents of IMS implementation on IMS maturity level and its impact on Operational Performance in SMEs. We use the Theory of Planned Behavior to develop the conceptual framework which is empirically evaluated using primary data from Indian SMEs.

The results from our study indicate that while intrinsic motivation of firms has a positive impact on the level of IMS maturity, extrinsic motivation has a negative impact on the same. Higher levels of IMS Maturity are found to lead to higher operational performance. In the next section, we theoretically develop our hypotheses by engaging relevant extant literature.