Do external quality certifications improve firms' conduct? International evidence from manufacturing and service industries

Empirically adding to the structure-conduct-performance paradigm, this paper uses firm-level survey data across more than 100 countries to examine the influence of external certifications on the behavior or conduct of firms. We consider two dimensions of firms' conduct - R&D (research and development) spending and licensing of foreign technologies while accounting for a host of firm-specific factors (e.g., firms' age, ownership structure, size). The extant literature has mainly focused on the influence of certifications on firms' performance and generally considered single nations or a modest set of nations. Our results show external certification to positively affect conduct, whether conduct is measured by R&D or foreign technology licensing. The results are robust when broader external audits are considered. Manufacturing and service industries show qualitatively similar patterns, albeit the magnitudes of impacts differ. Older firms show some different attitudes towards R&D versus licensing, whereas the effects of larger size are consistently positive. Finally, firms located in the main business cities exhibit greater propensities to perform R&D and license foreign technologies, ceteris paribus. (C) 2019 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.