| Summary: | The contingency view of Quality Management (QM) postulates that QM practices and performance does not always have a direct positive relationship but is contingent upon a third variable that might be moderating it. Despite various QM related publications in the literature, few empirical works were conducted with this view in mind. In this study, operational complexity has been identified as the new moderating variable that is affecting the relationship of QM practices and operational performance. This is based on distinct operational characteristics between original equipment manufacturer (OEM) and contract manufacturer (CM). This survey-based study was conducted in Malaysia's Electrical and Electronics (E & E) manufacturing industry that contributes significantly to the economy and creation of jobs in the country. Data were obtained from 116 companies with a response rate of 17.8%, using company as unit of analysis. Partial Least Square Structural Equation Modelling (PLS-SEM) technique was applied to analyze the data. All three multidimension variables of QM practices, operational performance and operational complexity were modelled as second-order variables in PLS-SEM. Measurement model was validated using Confirmatory Factor Analysis (CFA) and proven to be reliable. Results of structural model reveal that operational complexity not only has a positive impact on operational performance but also indicate the higher the operational complexity, the stronger the relationship of QM practices and operational performance. There is no significant difference in the level of operational complexity for OEM and CM. The results also reveal that operational complexity is indeed a significant variable that needs more study. The findings imply that high operational complexity is associated with learning organisation and complexity absorption approach enhances QM implementation in organisational level. Meanwhile, low operational complexity is associated with complexity reduction approach and enhances QM implementation in process level. However, based on Complex Adaptive System (CAS), high operational complexity needs to be managed so as not to reach the threshold of a chaotic stage, which will affect performance. Hence, a web-based IT system has been proposed to manage operational complexity in a local CM that faces an increase in frequency of exchange of information with customers. This study contributes to knowledge in contingency view in QM and extended the application of PLS-SEM in operations management research. It provides insights for managers to cope with increasing operational complexity and to improve performance in the current dynamic business environment.
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