PhD Research - Ann Terlaak

Degree Conferred

Dissertation Title
Exploring the Adoption Process and Performance Consequences of Industry Management Standards: The Case of ISO 9000

Industry management standards have emerged as popular tools to guide business practices in a variety of areas. ISO 9000 is a prominent standard focusing on quality management practices, and ISO 14001 and the Chemical Industry's Responsible Care Program are renowned examples of environmental management standards. Despite their prevalence, understanding of their adoption processes and performance consequences is still limited. In this thesis, I narrow this research gap by exploring the ISO 9000 quality management standard. I assemble a 13-year panel dataset that traces 24,580 manufacturing facilities, 5634 of which certify with ISO 9000 during my observation period. My analysis shows no evidence that ISO 9000 improves the operational and environmental performance of companies. Instead, I find that certification with ISO 9000 serves to communicate to stakeholders about underlying performance characteristics. Specifically, in the analysis on the adoption of ISO 9000 I find that a signaling framework correctly predicts the influence of managerial foresight on adoption propensities. In the analysis on the performance consequences from certification, I find that this means of signaling is particularly beneficial where information asymmetries are high. I also find that certification with ISO 9000 is especially attractive for below-average performing companies that seek to differentiate themselves from the very poor performers. High performing companies, in contrast, certify less frequently with ISO 9000. Overall, these results suggest that industry management standards can help stakeholders to differentiate among companies. However, pressures for adoption from supply chains and industry networks in conjunction with difficulties of certifying adherence to the standards can diminish their signaling value. Industry recently started responding to this issue by restructuring ISO 9000 and by introducing more industry specific versions of ISO 9000. However, such industry-driven solutions are unlikely to occur in the context of environmental management standards, and policy makers need to intervene to support both their diffusion and credibility.