Can certification help incumbent firms?

  • 124 Accesses


Are noncompulsory certifications persistently beneficial for incumbent firms across responsive subjects and across time in emerging institutions, given that they are likely to be conducive for start-ups suggested in prior studies? By exploring in emerging economy context with one cross-sectional and another longitudinal dataset of firms in China, we invoke legitimacy-based view to develop a concept named as institutional consciousness and find out distinctive effects of resource acquisitions from the public versus the government caused by noncompulsory certifications. Specifically, they on average only provide benefits toward achieving higher sales but trivial in obtaining subsidies whereas the two effects reverse from earlier years to late years when incorporating the temporal effects. This produces significant implications for entrepreneurs to acknowledge the distinguished roles of noncompulsory certifications to the different targets while enriches the legitimacy view of the significance of business strategies. The study further introduces a new perspective to disentangle the paradox of embedded agency issue in institutional changes while reminds the importance to treat the government as an organizational actor instead of fixed condition.

This is a preview of subscription content, log in to check access.

Access options

Buy single article

Instant unlimited access to the full article PDF.

US$ 39.95

Price includes VAT for USA

Subscribe to journal

Immediate online access to all issues from 2019. Subscription will auto renew annually.

US$ 99

This is the net price. Taxes to be calculated in checkout.


  1. 1.

    Though it is arguable that the independent variable is behavior-based, further supports will be evidenced if given more comprehensive dataset. Rather, the variable is solid since it’s a highly encouraged but not forced standard initiated by the central government under the Outline of the National Medium- and Long-term Scientific and Technology Development theme (CPG, 2006), thus satisfying the definition of noncompulsory certification.

  2. 2.

    Nevertheless, we’ve later employed a Heckman selection model to confirm whether the sample is absent from self-selection issues (Heckman, 1979). We’ve adopted a logit model for the first stage model regressing the possession of noncompulsory certifications on the previous sales and assets. We’ve then plugged in the obtained residuals in the second stage model, where the residual’s p value for sales is .1957 while for subsidies is .7466. This helps to confirm that self-selection bias is not an issue in the current study (Qian et al., 2018).

  3. 3.

    Following the suggestions of one reviewer, we’ve further tested whether the household consumption level could disturb our findings since real needs of the products can also affect the sales. Yet, its significant high correlation with per capita GDP (ρ = .967, p < .001) and high VIF result have revealed that multicollinearity is apparent. Given that a variety of economic literature has indicated consumptions usually contribute to the largest portion of GDP (Mankiw, Romer, & Weil, 1992), we did not include this variable though inclusion didn’t change the results.


  1. Abor, J. 2007. Debt policy and performance of SMEs: Evidence from Ghanaian and south African firms. The Journal of Risk Finance, 8(4): 364–379.

  2. Aghion, P., Akcigit, U., & Howitt, P. 2014. What do we learn from Schumpeterian growth theory? In P. Aghion, & S. Durlauf (Eds.). Handbook of economic growth, vol. 2: 515–564. Oxford: North Holland.

  3. Ahlstrom, D., & Bruton, G. D. 2001. Learning from successful local private firms in China: Establishing legitimacy. Academy of Management Perspectives, 15(4): 72–83.

  4. Ahlstrom, D., & Bruton, G. D. 2002. An institutional perspective on the role of culture in shaping strategic actions by technology-focused entrepreneurial firms in China. Entrepreneurship Theory and Practice, 26(4): 53–68.

  5. Ahlstrom, D., & Bruton, G. D. 2006. Venture capital in emerging economies: Networks and institutional change. Entrepreneurship Theory and Practice, 30(2): 299–320.

  6. Ahlstrom, D., Bruton, G. D., & Yeh, K. S. 2008. Private firms in China: Building legitimacy in an emerging economy. Journal of World Business, 43(4): 385–399.

  7. Ahlstrom, D., Chen, S. J., & Yeh, K. S. 2010. Managing in ethnic Chinese communities: Culture, institutions, and context. Asia Pacific Journal of Management, 27(3): 341–354.

  8. Ahlstrom, D., & Ding, Z. 2014. Entrepreneurship in China: An overview. International Small Business Journal, 32(6): 610–618.

  9. Ahlstrom, D., Young, M. N., Nair, A., & Law, P. 2003. Managing the institutional environment: Challenges for foreign firms in post WTO China. SAM Advanced Management Journal, 68(2): 41–49.

  10. Armanios, D. E., Eesley, C. E., Li, J., & Eisenhardt, K. M. 2017. How entrepreneurs leverage institutional intermediaries in emerging economies to acquire public resources. Strategic Management Journal, 38(7): 1373–1390.

  11. Arnoldi, J., & Muratova, Y. 2018. Unrelated acquisitions in China: The role of political ownership and political connections. Asia Pacific Journal of Management.

  12. Bachmann, D. P., Elfrink, J., & Vazzana, G. 1999. E-mail and snail mail face off in rematch. Marketing Research, 11(4): 10–15.

  13. Barker, E. 1962. The politics of Aristotle. New York:Oxford University Press.

  14. Bitektine, A. 2011. Toward a theory of social judgments of organizations: The case of legitimacy, reputation, and status. Academy of Management Review, 36(1): 151–179.

  15. Bitektine, A., & Haack, P. 2015. The “macro” and the “micro” of legitimacy: Toward a multilevel theory of the legitimacy process. Academy of Management Review, 40(1): 49–75.

  16. Bruton, G. D., Ahlstrom, D., & Li, H. L. 2010. Institutional theory and entrepreneurship: Where are we now and where do we need to move in the future? Entrepreneurship Theory and Practice, 34(3): 421–440.

  17. Bruton, G. D., Ahlstrom, D., & Obloj, K. 2008. Entrepreneurship in emerging economies: Where are we today and where should the research go in the future. Entrepreneurship Theory and Practice, 32(1): 1–14.

  18. Carlos, W. C., & Lewis, B. W. 2018. Strategic silence: Withholding certification status as a hypocrisy avoidance tactic. Administrative Science Quarterly, 63(1): 130–169.

  19. Cassiman, B., Colombo, M. G., Garrone, P., & Veugelers, R. 2005. The impact of M&a on the R&D process: An empirical analysis of the role of technological-and market-relatedness. Research Policy, 34(2): 195–220.

  20. Central People’s Government of the People’s Republic of China. 2006. Outline of the National Medium- and Long-term Scientific and Technology Development Plan., Accessed Mar. 2, 2017.

  21. Conway, J. M., & Lance, C. E. 2010. What reviewers should expect from authors regarding common method bias in organizational research. Journal of Business and Psychology, 25(3): 325–334.

  22. Deephouse, D. L., Bundy, J., Tost, L. P., & Suchman, M. C. 2017. Organizational legitimacy: Six key questions. In Greenwood, R., Oliver, C., Lawrence, T. B., & Eesley, C. 2016. Institutional barriers to growth: Entrepreneurship, human capital and institutional change. Organization Science, 27(5): 1290–1306.

  23. Eesley, C. 2016. Institutional barriers to growth: entrepreneurship, human capital and institutional change. Organization Science, 27(5): 1290–1306.

  24. Failla, V., Melillo, F., & Reichstein, T. 2017. Entrepreneurship and employment stability—Job matching, labour market value, and personal commitment. Journal of Business Venturing, 32(2): 162–177.

  25. Garud, R., Hardy, C., & Maguire, S. 2007. Institutional entrepreneurship as embedded agency: An introduction to the special issue. Organization Studies, 28(7): 957–969.

  26. Graffin, S. D., & Ward, A. J. 2010. Certifications and reputation: Determining the standard of desirability amidst uncertainty. Organization Science, 21(2): 331–346.

  27. Heckman, J. 1979. Sample selection bias as a specification error. Econometrica, 47(1): 153–161.

  28. Hegel, G. W. F., & Wood, A. W. 1991. Hegel: Elements of the philosophy of right. United Kingdom:Cambridge University Press.

  29. Hoefer, R. L., & Green, S. E. 2016. A rhetorical model of institutional decision making: The role of rhetoric in the formation and change of legitimacy judgments. Academy of Management Review, 41(1): 130–150.

  30. Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. 2000. Strategy in emerging economies. Academy of Management Journal, 43(3): 249–267.

  31. Kelley, H. H. and Michela, J. L. 1980. Attribution Theory and Research, Annual Review of Psychology, 31(1), 457–501.

  32. Khanna, T., Palepu, K. G., & Sinha, J. 2006. Strategies that fit emerging markets. Harvard Business Review, 83(6): 4–19.

  33. Laird, N. M., & Ware, J. H. 1982. Random-effects models for longitudinal data. Biometrics, 38(4): 963–974.

  34. Lawrence, T. B., Suddaby, R., & Leca, B. 2009. Institutional work: Actors and Agency in Institutional Studies of organizations. New York:Cambridge university press.

  35. Lewin, A. Y., Massing, S., & Peeters, C. 2009. Why are companies offshoring innovation? The emerging global race for talent. Journal of International Business Studies, 40(6): 901–925.

  36. Li, J., Xia, J., & Zajac, E. J. 2018. On the duality of political and economic stakeholder influence on firm innovation performance: Theory and evidence from Chinese firms. Strategic Management Journal, 39(1): 193–216.

  37. Lin, J., & Si, S. 2010. Can guanxi be a problem? Contexts, ties, and some unfavorable consequences of social capital in China. Asia Pacific Journal of Management, 27(3): 561–581.

  38. Lounsbury, M., & Glynn, M. A. 2001. Cultural entrepreneurship: Stories, legitimacy, and the acquisition of resources. Strategic Management Journal, 22(6–7): 545–564.

  39. Mankiw, N. G., Romer, D., & Weil, D. N. 1992. A contribution to the empirics of economic growth. The Quarterly Journal of Economics, 107(2): 407–437.

  40. McCloskey, D. N. 2017. Bourgeois equality: How ideas, not capital or institutions, enriched the world. Chicago: University of Chicago Press.

  41. McConnell, J. J., & Servaes, H. 1990. Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27(2): 595–612.

  42. Ministry of Science and Technology of the PRC. 2016. Notice on Amending the Regulations for the Administration of the Accreditation of High-Tech Enterprise Certificate Program., Accessed May. 15, 2017.

  43. Nee, V., & Opper, S. 2012. Capitalism from below: Markets and institutional change in China. United States:Harvard University Press.

  44. Newman, A., Schwarz, S., & Ahlstrom, D. 2017. Microfinance and entrepreneurship: An introduction. International Small Business Journal, 35(7): 787–792.

  45. North, D. C. 1990. Institutions, institutional change and economic performance. United States:Cambridge university press.

  46. Opper, S., & Andersson, F. N. G. 2018. Are entrepreneurial cultures stable over time? Historical evidence from China. Asia Pacific Journal of Management.

  47. Owen, S., & Yawson, A. 2010. Corporate life cycle and M&a activity. Journal of Banking & Finance, 34(2): 427–440.

  48. Peng, M. W. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28(2): 275–296.

  49. Peng, M. W. 2004. Outside directors and firm performance during institutional transitions. Strategic Management Journal, 25(5): 453–471.

  50. Peng, M. W., Wang, D. Y., & Jiang, Y. 2008. An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39(5): 920–936.

  51. Pollack, J. M., Rutherford, M. W., & Nagy, B. G. 2012. Preparedness and cognitive legitimacy as antecedents of new venture funding in televised business pitches. Entrepreneurship Theory and Practice, 36(5): 915–939.

  52. Puffer, S. M., McCarthy, D. J., & Boisot, M. 2010. Entrepreneurship in Russia and China: The impact of formal institutional voids. Entrepreneurship Theory and Practice, 34(3): 441–467.

  53. Qian, G. M., Liu, B., & Wang, Q. T. 2018. Government subsidies, state ownership, regulatory infrastructure, and the import of strategic resources: Evidence from China. Multinational Business Review, 26(4): 319–336.

  54. Rimal, R. N., & Lapinski, M. K. 2015. A re-explication of social norms, ten years later. Communication Theory, 25(4): 393–409.

  55. Salancik, G. R., & Pfeffer, J. 1978. A social information processing approach to job attitudes and task design. Administrative Science Quarterly, 23(2): 224–253.

  56. Saunders, A., & Cornett, M. M. 1999. Financial institutions management: A risk management approach. New York:McGraw-Hill Education.

  57. Scott, W. R. 2013. Institutions and organizations: Ideas, interests, and identities. United States:Sage Publications.

  58. Sine, W. D., David, R. J., & Mitsuhashi, H. 2007. From plan to plant: Effects of certifications on operational start-up in the emergent independent power sector. Organization Science, 18(4): 578–594.

  59. Srinivasan, S. S., Anderson, R., & Ponnavolu, K. 2002. Customer loyalty in e commerce: An exploration of its antecedents and consequences. Journal of Retailing, 78(1): 41–50.

  60. Stangor, C., Sechrist, G. B., & Jost, J. T. 2001. Changing racial beliefs by providing consensus information. Personality and Social Psychology Bulletin, 27(4): 486–496.

  61. Stevens, C. E., Xie, E., & Peng, M. W. 2016. Toward a legitimacy-based view of political risk: The case of Google and yahoo in China. Strategic Management Journal, 37(5): 945–963.

  62. Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3): 571–610.

  63. The Paper. 2018. After the famous trademark certification has been halted twice: the government either announce surprisingly or replace the issuing administrative principal., Accessed May. 7, 2018.

  64. Thornton, P. H., & Ocasio, W. 2008. Institutional logics. In R. Greenwood, C. Oliver, K. Sahlin, & R. Suddaby (Eds.). The SAGE Handbook of Organizational Institutionalism: 99–128. London: Sage Publications Ltd.

  65. Wang, L. C., Ahlstrom, D., Nair, A., & Hang, R. Z. 2008. Creating globally competitive and innovative products: China's next Olympic challenge. SAM Advanced Management Journal, 73(3): 4–15.

  66. Wang, Q., Xie, X., & Wang, M. 2015. Environmental regulation and firm location choice in China. China Economic Journal, 8(3): 1–20.

  67. Watson, J. 2002. Comparing the performance of male-and female-controlled businesses: Relating outputs to inputs. Entrepreneurship Theory and Practice, 26(3): 91–100.

  68. Wernerfelt, B. 1984. A resource-based view of the firm. Strategic Management Journal, 5(2): 171–180.

  69. Yiu, D. W., Hoskisson, R. E., Bruton, G. D., & Lu, Y. 2014. Dueling institutional logics and the effect on strategic entrepreneurship in Chinese business groups. Strategic Entrepreneurship Journal, 8(3): 195–213.

  70. Young, M. N., Tsai, T., Wang, X., Liu, S., & Ahlstrom, D. 2014. Strategy in emerging economies and the theory of the firm. Asia Pacific Journal of Management, 31(2): 331–354.

  71. Zalesny, M. D., & Ford, J. K. 1990. Extending the social information processing perspective: New links to attitudes, behaviors, and perceptions. Organizational Behavior and Human Decision Processes, 47(2): 205–246.

  72. Zellner, A. 1963. Estimators for seemingly unrelated regression equations: Some exact finite sample results. Journal of the American Statistical Association, 58(304): 977–992.

  73. Zimmerman, M. A., & Zeitz, G. J. 2002. Beyond survival: Achieving new venture growth by building legitimacy. Academy of Management Review, 27(3): 414–431.

Download references


We sincerely thank APJM SI editors David Ahlstrom, Mike Peng, Weilei Shi, Li Sun, Yuli Zhang, two anonymous reviewers and participants at APJM SI conference in Nankai University. We also thank Prof. Gongming Qian for his insightful comments.

Author information

Correspondence to Bin Liu.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Liu, B., Wang, Q. Can certification help incumbent firms?. Asia Pac J Manag (2019).

Download citation


  • Noncompulsory certification
  • Institutional theory
  • Cognition
  • Emerging economies
  • Resources
  • Dynamics
  • China