Is certification an effective legitimacy strategy for foreign firms in emerging markets?

Jianhong Zhang, Jiangang Jiang, Niels Noorderhaven*

*Corresponding author for this work

Research output: Contribution to journal › Article › Scientific › peer-review

Abstract

This study explores the effect of certification on profitability in a transition economy. Obtaining a certification is a strategic legitimacy action that positively affects a firm's profitability, specifically for a foreign firm in a transition economy, where institutions are less developed and stable. However, we argue that certification is particularly effective if legitimacy based on adaptation to local circumstances is weak. An analysis of data from 319 MNE subsidiaries in China over the period 1998-2009 largely supports our hypotheses. Certification is an effective strategic action which improves profitability. However, the strength of this effect is influenced by the level of marketization of the host region, the institutional quality in the home country, the density of the foreign firm community in the host country, the number of years the foreign firm has been in the host country, and the size of the foreign firm. These findings throw light on the role certification can play in helping firms overcome the liability of foreignness in a transition economy.
Original languageEnglish
Pages (from-to)252-267
JournalInternational Business Review
Volume28
Issue number2
DOIs
Publication statusPublished - Apr 2019

Keywords

  • Certification
  • Legitimacy
  • Emerging economies
  • Multinational corporations

Cite this

Zhang, Jianhong ; Jiang, Jiangang ; Noorderhaven, Niels. / Is certification an effective legitimacy strategy for foreign firms in emerging markets?. In: International Business Review. 2019 ; Vol. 28, No. 2. pp. 252-267.
@article{f56d078d26ff43e98e31294efccd9bc2,
title = "Is certification an effective legitimacy strategy for foreign firms in emerging markets?",
abstract = "This study explores the effect of certification on profitability in a transition economy. Obtaining a certification is a strategic legitimacy action that positively affects a firm's profitability, specifically for a foreign firm in a transition economy, where institutions are less developed and stable. However, we argue that certification is particularly effective if legitimacy based on adaptation to local circumstances is weak. An analysis of data from 319 MNE subsidiaries in China over the period 1998-2009 largely supports our hypotheses. Certification is an effective strategic action which improves profitability. However, the strength of this effect is influenced by the level of marketization of the host region, the institutional quality in the home country, the density of the foreign firm community in the host country, the number of years the foreign firm has been in the host country, and the size of the foreign firm. These findings throw light on the role certification can play in helping firms overcome the liability of foreignness in a transition economy.",
keywords = "Certification, Legitimacy, Emerging economies, Multinational corporations",
author = "Jianhong Zhang and Jiangang Jiang and Niels Noorderhaven",
year = "2019",
month = "4",
doi = "10.1016/j.ibusrev.2018.09.003",
language = "English",
volume = "28",
pages = "252--267",
journal = "International Business Review",
issn = "0969-5931",
publisher = "Elsevier Science BV",
number = "2",

}

Zhang, J, Jiang, J & Noorderhaven, N 2019, 'Is certification an effective legitimacy strategy for foreign firms in emerging markets?', International Business Review, vol. 28, no. 2, pp. 252-267. https://doi.org/10.1016/j.ibusrev.2018.09.003

Is certification an effective legitimacy strategy for foreign firms in emerging markets? / Zhang, Jianhong; Jiang, Jiangang; Noorderhaven, Niels.

In: International Business Review, Vol. 28, No. 2, 04.2019, p. 252-267.

Research output: Contribution to journal › Article › Scientific › peer-review

TY - JOUR

T1 - Is certification an effective legitimacy strategy for foreign firms in emerging markets?

AU - Zhang, Jianhong

AU - Jiang, Jiangang

AU - Noorderhaven, Niels

PY - 2019/4

Y1 - 2019/4

N2 - This study explores the effect of certification on profitability in a transition economy. Obtaining a certification is a strategic legitimacy action that positively affects a firm's profitability, specifically for a foreign firm in a transition economy, where institutions are less developed and stable. However, we argue that certification is particularly effective if legitimacy based on adaptation to local circumstances is weak. An analysis of data from 319 MNE subsidiaries in China over the period 1998-2009 largely supports our hypotheses. Certification is an effective strategic action which improves profitability. However, the strength of this effect is influenced by the level of marketization of the host region, the institutional quality in the home country, the density of the foreign firm community in the host country, the number of years the foreign firm has been in the host country, and the size of the foreign firm. These findings throw light on the role certification can play in helping firms overcome the liability of foreignness in a transition economy.

AB - This study explores the effect of certification on profitability in a transition economy. Obtaining a certification is a strategic legitimacy action that positively affects a firm's profitability, specifically for a foreign firm in a transition economy, where institutions are less developed and stable. However, we argue that certification is particularly effective if legitimacy based on adaptation to local circumstances is weak. An analysis of data from 319 MNE subsidiaries in China over the period 1998-2009 largely supports our hypotheses. Certification is an effective strategic action which improves profitability. However, the strength of this effect is influenced by the level of marketization of the host region, the institutional quality in the home country, the density of the foreign firm community in the host country, the number of years the foreign firm has been in the host country, and the size of the foreign firm. These findings throw light on the role certification can play in helping firms overcome the liability of foreignness in a transition economy.

KW - Certification

KW - Legitimacy

KW - Emerging economies

KW - Multinational corporations

U2 - 10.1016/j.ibusrev.2018.09.003

DO - 10.1016/j.ibusrev.2018.09.003

M3 - Article

VL - 28

SP - 252

EP - 267

JO - International Business Review

JF - International Business Review

SN - 0969-5931

IS - 2

ER -

Zhang J, Jiang J, Noorderhaven N. Is certification an effective legitimacy strategy for foreign firms in emerging markets? International Business Review. 2019 Apr;28(2):252-267. https://doi.org/10.1016/j.ibusrev.2018.09.003

Access to Document