SCIENCE, SPECIFIC KNOWLEDGE, AND TOTAL QUALITY MANAGEMENT

We analyze Total Quality Management (TQM) from an economic and organiz ational perspective. We find that TQM is a new organizing technology t hat is science-based, non-hierarchical, and non-market-oriented. It im proves productivity by encouraging the use of science in decision-maki ng and discouraging counter-productive defensive behavior. It also enc ourages effective creation and use of specific knowledge throughout th e organization. Effective implementation of TQM generally requires maj or changes in all three components of the organizational rules of the game, namely systems for allocating decision rights, performance measu rement systems, and reward and punishment systems.