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Quality Management System and Firm Performance in an Emerging Economy: The Case of Colombian Manufacturing Industries

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  • Juan Miguel Gallego
  • Luis H. Gutiérrez

Abstract

Over one million firms around the world have adopted a Quality Management System (QMS) that conforms to ISO 9001 certification in 2015 and recent figures show that certifications have rapidly increased in emerging economies. ISO 9001 is considered a signal of high quality for products or services in markets with large imported competition or firms competing in international markets. However, implementing ISO 9001 certification entails large costs to companies for documentation of operating procedures, training, internal auditing, and corrective action. The impact of QMS on firm performance is unknown in developing economies and is still under-researched for more developed countries. This paper takes advantage of unique data on the status of certified and non-certified manufacturing firms in Colombia (an emerging economy) and matches it with firm performance. In 2006, the Colombian government launched policies to reduce the cost of adopting certification. We use this change to implement a difference-in-differences specification on panel data of certified and non-certified firms by matching samples at the year 2003, three years before the policy change. This is the most comparable data possible. Our findings suggest that firms that adopt ISO 9001 certification increase labor productivity (measured as added value over labor) by 12 percent, and sales per employee and wages by 8 percent. The effect is larger for firms that adopted certifications two years after the new policies compared with firms that adopted them immediately. The potential mechanism to explain gains in firm performance is human capital because, prior to the changes, firms with more temporary workers could not take advantage of certification.

Suggested Citation

  • Juan Miguel Gallego & Luis H. Gutiérrez, 2017. "Quality Management System and Firm Performance in an Emerging Economy: The Case of Colombian Manufacturing Industries," IDB Publications (Working Papers) 8260, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:8260
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    References listed on IDEAS

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    1. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
    2. David I. Levine & Michael W. Toffel, 2010. "Quality Management and Job Quality: How the ISO 9001 Standard for Quality Management Systems Affects Employees and Employers," Management Science, INFORMS, vol. 56(6), pages 978-996, June.
    3. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
    4. Christian Volpe Martincus & Sebastián Castresana & Tomás Castagnino, 2010. "ISO Standards: A Certificate to Expand Exports? Firm-Level Evidence from Argentina," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 896-912, November.
    5. Francisco Starke & Rangamohan V. Eunni & Nuno Manoel Martins Dias Fouto & Claudio Felisoni de Angelo, 2012. "Impact of ISO 9000 certification on firm performance: evidence from Brazil," Management Research Review, Emerald Group Publishing, vol. 35(10), pages 974-997, September.
    6. 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.
    7. Charles J. Corbett & María 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.
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    10. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
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    Cited by:

    1. Calza, Elisa & Goedhuys, Micheline, 2018. "Domestic quality certification and growth of Vietnamese MSMEs," MERIT Working Papers 026, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    Quality management; Manufacturing Industries; Firm performance; Firm innovation; Labor Productivity Growth; Exports Growth; Human Capital; Wages; Management Systems; Public Policy; exports; human capital; firm performance; wages; manufacturing industries; labor productivity;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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