The relationship between total quality management (TQM) and innovation capability affecting organisational performance was examined. Empirical data were obtained from a survey of 437 automobile and auto parts industries and 462 electrical and electronic industries . Structural equation modelling (SEM) is used to analyse structural relationships between measured variables and latent construct variables. Findings suggested that TQM and innovation capability had a positive influence on organisational performance. Analysis of the structural equation model for TQM, innovation capability and organisational performance gave consistent results with empirical information. Results from our research showed that TQM had a positive effect on innovation capability and organisational performance. Findings indicated that criteria related with people management and supplier quality management had a stronger correlation with performance. Accordingly, organisations should provide the necessary quality-related training with rewards for superior quality improvement. Leaders should maintain close communication with suppliers concerning quality considerations and design changes.
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