LINKING QUALITY MANAGEMENT TO COMPANY PERFORMANCE THROUGH INNOVATION: A SEM APPROACH IN THE CROATIAN METAL SECTOR

Abstract

Quality management demands standardization. Innovation demands experimentation. How manufacturing firms reconcile the two is not settled in the empirical literature. This paper tests the relationship between quality management practices, innovation types, and company performance using survey data from 200 Croatian metal processing firms. Partial Least Squares Structural Equation Modelling is applied to the pathways connecting quality management with product, process, and business model innovation and their respective links to performance. The results indicate that quality management predicts all three innovation types, with the strongest association being with process innovation (β = 0.571). The innovation–performance pathways diverge. Process innovation is the dominant performance driver (β = 0.444). Business model innovation contributes moderately (β = 0.264). Product innovation shows no significant direct link (β = 0.008). In commodity-oriented manufacturing, product novelty is not automatically rewarded in market results.