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Can certification help incumbent firms?

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Abstract

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.

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Notes

  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.

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Acknowledgements

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.

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Correspondence to Bin Liu.

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Liu, B., Wang, Q. Can certification help incumbent firms?. Asia Pac J Manag (2019). https://doi.org/10.1007/s10490-018-9632-6

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Keywords

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