ISO Certification, Corruption and Firm Performance: A Cross-Country Study
We employ the World Bank Enterprise Survey (WBES) data collected from 2006-2011 for over 40,000 mostly small and medium-size enterprises (SME) in 115 countries to study the effect of International Organization for Standardization (ISO) certification on sales growth and labor productivity. Approximately 20 percent of the surveyed firms have at least one ISO certifications (ISO 9000, ISO 9002 or ISO 14000). Our results from both the univariate tests and multivariate regressions show that ISO-certified firms exhibit higher sales growth and higher labor productivity than non-certified firms. The results are robust after controlling for industry effects and country level macro-economic variables. We further investigate whether or not the financial benefits from ISO certification vary when firms operate in different levels of corrupt business environment. We find that the positive link between ISO certification and labor productivity remain highly significant regardless the corruption levels. However, the positive link between sales growth and ISO certification becomes insignificant when a firm operates in a highly corrupt business environment. Our paper provides the first large scale cross-section and cross-country evidence on the effect of ISO certification on firm level financial benefits.