ISO 9000 certification and technical efficiency of foreign‐financed manufacturing firms in southern China

Abstract

PurposeBased on a sample of foreign‐financed manufacturing firms in southern China, the purpose of this paper is to study the effects of ISO certification on productivity.Design/methodology/approachThe paper employs the stochastic frontier approach to estimate frontier efficiency scores at firm level.FindingsThe empirical results suggest that the implementation of ISO was able to improve firms' productivity in the form of a wholly disembodied shift of the production frontier. The results further show that there was a mildly positive embodied shift of the production frontier due to the effects of ISO on the marginal product of labor. However, the embodied effects of ISO on the marginal product of capital were not significant.Research limitations/implicationsThe sample size is small and the data were collected from southern China. A generalization of results to other parts of China should be interpreted with caution. Despite the limited degree of generalization, firms with ISO certifications are suggested to be aware of certain flexibility in the implementation of the ISO documented procedures.Practical implicationsThe findings of the paper should be of general interest to firms seeking or adopting ISO system or other international standards.Originality/valueThe originality of the paper resides in the fact that the empirical work investigates the embodied effects of ISO certification on the marginal product of labor and capital.