Productivity and Profitability through Quality ‐ Myth and Reality

The 1980s have seen the emergence of a new perception of productivity and its relationship to quality, cost and profitability. Supported by the startling success of the Japanese and other East Asian nations, the traditional notion that superior quality and high productivity and profitability are mutually exclusive has been seriously challenged by academics and managers alike. While most company studies point to a positive relationship between quality and productivity, the results of the empirical studies are mixed. Recent research by the author confirms that the quality‐productivity relationship is situation‐dependent. This article first discusses this relationship in the “total productivity” context. Then, some key empirical studies and their results on quality and its correlates, namely, productivity, cost and profitability are presented and discussed. Finally, the areas of vital importance for further research in this field are outlined.