Quality Management System and Firm Performance in an Emerging Economy: The Case of Colombian Manufacturing Industries
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Over one million firms around the world have adopted a QualityManagement System (QMS) that conforms to ISO 9001 certification in 2015and recent figures show that certifications have rapidly increased inemerging economies. ISO 9001 is considered a signal of high quality forproducts or services in markets with large imported competition or firmscompeting in international markets. However, implementing ISO 9001certification entails large costs to companies for documentation of operatingprocedures, training, internal auditing, and corrective action. The impact ofQMS on firm performance is unknown in developing economies and is stillunder-researched for more developed countries. This paper takesadvantage of unique data on the status of certified and non-certifiedmanufacturing firms in Colombia (an emerging economy) and matches itwith firm performance. In 2006, the Colombian government launchedpolicies to reduce the cost of adopting certification. We use this change toimplement a difference-in-differences specification on panel data of certifiedand non-certified firms by matching samples at the year 2003, three yearsbefore the policy change. This is the most comparable data possible. Ourfindings suggest that firms that adopt ISO 9001 certification increase laborproductivity (measured as added value over labor) by 12 percent, and salesper employee and wages by 8 percent. The effect is larger for firms thatadopted certifications two years after the new policies compared with firmsthat adopted them immediately. The potential mechanism to explain gainsin firm performance is human capital because, prior to the changes, firmswith more temporary workers could not take advantage of certification.