Certification and Business Risk

Abstract

This chapter investigates the scope for international private standards to play a role in reducing business risk among the small and medium enterprises in Vietnam. Business risk is measured as variability in revenue, variability in customer base, practice of making informal payments, and temporary firm closure. The results show lower levels of business risk among certified firms, especially for firms in the middle deciles of the risk distribution. This finding is robust to the use of different business risk measures. Certification also correlates negatively with risk for technologically advanced firms, as well as firms located in rural areas and northern provinces of Vietnam. The results suggest that firms could find protection from business downsides by investing in internationally recognized quality management tools.

Just a Piece of Paper? Domestic Standards Certification and Small Firm Growth in Viet Nam

“…The increase in sales can be driven either by an increase in the quantity sold or -if firms are not pricetakers -by higher prices due to the higher willingness to pay of consumers, this representing a pure certification premium . Standards certificates can also contribute to reducing variability in firm revenues and business risk, when these are associated with a scarce customers' ability to assess products quality and safety (Trifković, 2018). The literature refers to this positive direct impact of standard certificates on revenues from sales and/ or export as an external effect originating from a better competitive position in the market (Clougherty & Grajek, 2014).…”

“…For firm level performance, we investigate firms' sales growth, using empirical specifications from the industrial economics literature studying firm dynamics and explaining firm size distributions in developed and developing countries (Evans, 1987a(Evans, , 1987bSleuwaegen & Goedhuys, 2002;Sutton, 1997). This focus on sales growth and on domestically awarded certificates represents a novelty within the body of empirical literature on SMEs performance in Viet Nam, since empirical studies have, instead, looked at the effects of international certifications on other performance indicators, such as labour productivity (Calza, Goedhuys, & Trifković, 2019;Trifković, 2016), business risk (Trifković, 2018), work conditions (Trifković, 2017), and environmental performance (Nguyen & Hens, 2015).…”