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Certification in the Indian Offshore IT Services Industry

  • Anandasivam Gopal

    ()

    (Decision, Operations, and Information Technologies, Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

  • Guodong (Gordon) Gao

    ()

    (Decision, Operations, and Information Technologies, Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

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    Third-party process certification programs such as the ISO 9001 and capability maturity model (CMM) have been widely adopted in recent years. In this study we employ three competing theoretical frameworks--signaling, efficiency gains, and institutional theory--to analyze the motivations for a firm to acquire quality certification and the performance implications thereafter. We test these hypotheses in the context of CMM certification based on data from the Indian offshore IT services industry between 1997 and 2002. Our results indicate that more cost-effective firms and export-oriented firms are more likely to seek out and acquire certification. In addition, CMM-certified firms show significant improvements in exports, but not on the firm's cost structure. Furthermore, our findings suggest that CMM certification helps indicate firm capabilities to potential customers and thus appear to be most consistent with signaling explanations of certification rather than the efficiency gains or institutional theories.

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    File URL: http://dx.doi.org/10.1287/msom.1080.0234
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    Article provided by INFORMS in its journal Manufacturing & Service Operations Management.

    Volume (Year): 11 (2009)
    Issue (Month): 3 (December)
    Pages: 471-492

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    Handle: RePEc:inm:ormsom:v:11:y:2009:i:3:p:471-492
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    1. Charles J. Corbett & MarĂ­a J. Montes-Sancho & David A. Kirsch, 2005. "The Financial Impact of ISO 9000 Certification in the United States: An Empirical Analysis," Management Science, INFORMS, vol. 51(7), pages 1046-1059, July.
    2. Terlaak, Ann & King, Andrew A., 2006. "The effect of certification with the ISO 9000 Quality Management Standard: A signaling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 579-602, August.
    3. Donald E. Harter & Mayuram S. Krishnan & Sandra A. Slaughter, 2000. "Effects of Process Maturity on Quality, Cycle Time, and Effort in Software Product Development," Management Science, INFORMS, vol. 46(4), pages 451-466, April.
    4. Richard Kum-yew Lai, 2005. "Inventory Signals," Microeconomics 0509001, EconWPA.
    5. Kevin B. Hendricks & Vinod R. Singhal, 2001. "The Long-Run Stock Price Performance of Firms with Effective TQM Programs," Management Science, INFORMS, vol. 47(3), pages 359-368, March.
    6. Abhijit V. Banerjee & Esther Duflo, 2000. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 989-1017.
    7. Kevin B. Hendricks & Vinod R. Singhal, 1997. "Does Implementing an Effective TQM Program Actually Improve Operating Performance? Empirical Evidence from Firms That Have Won Quality Awards," Management Science, INFORMS, vol. 43(9), pages 1258-1274, September.
    8. Khanna, Madhu & Damon, Lisa A., 1999. "EPA's Voluntary 33/50 Program: Impact on Toxic Releases and Economic Performance of Firms," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 1-25, January.
    9. Charles J. Corbett, 2006. "Global Diffusion of ISO 9000 Certification Through Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 8(4), pages 330-350, January.
    10. M. S. Krishnan & C. H. Kriebel & Sunder Kekre & Tridas Mukhopadhyay, 2000. "An Empirical Analysis of Productivity and Quality in Software Products," Management Science, INFORMS, vol. 46(6), pages 745-759, June.
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