Following Toyota's dramatic rise to prominence within the automotive industry in the late 1980's, firms around the globe have widely sought to adopt Lean Six Sigma (LSS) as a means of reducing costs, improving quality, and gaining an overall competitive advantage. While the operational benefits of LSS are largely undisputed, there are criticisms of the movement with regards to its effect on firm innovation capability. Prior academic studies investigating the relationship between LSS and innovation are largely conceptual in nature, rely heavily on qualitative data, and display a high degree of variability in results. The objective of this work was to empirically confirm whether LSS adoption had a positive, negative, or neutral impact on firm innovation performance.Financial data was collected for 151 publicly traded firms over the period from 1985 to 2018. The year of company-wide adoption of LSS was identified for each sample firm. Firms were paired with industry rivals using Coarsened Exact Matching (CEM), and statistical regressions were performed to show correlations between LSS implementation (as measured by inventory turns) and innovation performance (as measured by Total Factor Productivity, Research Quotient, and Tobin's Quotient). Regression results indicated that LSS implementation had a positive correlation with firm process innovation performance and the overall market perception of firm innovation and value, and a negative-to-neutral correlation with firm product innovation performance. Additional regressions performed at the industry-sector level revealed that the LSS-innovation relationship varies greatly by industry environment and is subject to unique industry effects and management implementation decisions.
College and Department
Ira A. Fulton College of Engineering and Technology; Technology
BYU ScholarsArchive Citation
Strong, Austin Michael, "Lean Six Sigma's Impact on Firm Innovation Performance" (2018). Theses and Dissertations. 6877.
lean manufacturing, six sigma, lean six sigma, LSS, innovation, product innovation, process innovation, Tobin's quotient, TQ, total factor productivity, TFP, research quotient, RQ, Austin Michael Strong