ISO 9000 Certification Impact On Market Performance Of Chinese Companies

Literature Review

The ISO 9000 series of quality management systems standard has been widely applied all over the world since its introduction in 1987. By the end of 2013, ISO 9000 had been adopted by over 1,129,000 facilities in 189 countries. Both academics and practitioners are interested in understanding the relationship between adoption of ISO 9000, and other factors (Christmann & Taylor, 2006; Du, Yin, & Zhang, 2016; Fikru, 2014a, 2014b, 2016; Nakamura, Takahashi, & Vertinsky, 2001; Pekovic, 2010; Wu, Chu, & Liu, 2007).

In 2008, the National Bureau of Statistics of China conducted an Economic Census of the service firms. The descriptions of variables, the coding are shown in the table. The data is available in Moodle.

As an indication of universal quality framework, ISO9000 certification has been embraced by an ever increasing number of business enterprises. In the last few years, there have been over half a million certified companies in both America and Europe, and China has had an excess of 390,000 certified companies. It has pulled in attention of many scholars as to whether certification has positive or negative impact on the performance of the companies.

This paper examines the ISO9000 certification impact on company’s market performance basing on the Chinese companies. Considering ISO9000 affirmation as an occasion, a confirmation impact model will be set up by methods for the occasion ponder strategy, which takes irregular return rate as a fundamental marker to gauge the ISO9000 accreditation impact on Chinese market execution in various occasion times.

Literature Review

Motivations for Adoption of ISO Standards

Immediately after introduction of the ISO 9000 series sometime back in 1987, an number of studies touching on motivational factors related to acquiring of ISO certification have been published, yet the prevalent research approach has taken a gander at these components from the alleged double perspective, or at the end of the day from the inward/outer inspirations point of view. In view of this examination approach, the internal factors include desire to make more profits, improve productivity, reduce on operation costs, and of course to improve on the quality. The external factors on the other hand include enhanced image, pressure from the suppliers and clients

(Santos & Millán, Motivation And Benefits Of Implementation And Certification According ISO 9001–The Portuguese Experience, 2013; Santos, Costa, & Leal, Motivation and benefits of implementation and certification according ISO 9001: The Portuguese experience, 2014)

In general, the ISO 9000 group of principles has turned into a primary necessity for entering the worldwide market (Sun, 2000; Abraham, Crawford, Carter, & Mazotta, 2000; Almeida, Caten, & Gutterres, 2009), subsequently some of the past research takes a shot at the reasons behind getting ISO certification argue that the external factors are better than the internal factors (Casadesús & Karapetrovic, 2005; Dongmo & Onojaefe, 2013; Heras-Saizarbitoria, Arana, & San , 2010).

Motivations for Adoption of ISO Standards

The instance of Japan gives solid proof to the in advance of specified articulation: in the 90s, ISO 9001 accreditation turned into a necessity for exports to Europe. Henceforth, Japan was compelled to acquire ISO accreditation keeping in mind the end goal to keep up and proceed with the development of its piece of the overall industry abroad (Heras-Saizarbitoria, Arana, & San , 2010; Kostagiolas & Kitsiou, 2008; Kumar & Balakrishnan, 2011).

Absolutely, there are likewise those (Abraham, Crawford, Carter, & Mazotta, 2000; Llopis & Tarí, 2003) who contend that the appropriation of gauges, for example, the ISO 9000 series is driven internally. For this situation, as upheld by Heras-Saizarbitoria et al. (2010), the adoption would regularly rely upon the organization’s particular hierarchical assets. For instance, on account of organizations which go for TQM usage, ISO 9001 certification is a great beginning towards reducing cost and quality change (Martínez-Costa, Martínez-Lorente, & Choi, 2008).

As Sun (2000) affirms, ISO 9001 accreditation can be helpful in the event that it is viewed as a route towards TQM. In any case, for ISO execution requires a generous budgetary asset, which can change from as meagre as ten thousand dollars to as much as three hundred thousand dollars (Martínez-Lorente & Martínez-Costa, 2004) and on the grounds that the enhancements yielded by such accreditation are easy to refute (Almeida, Caten, & Gutterres, 2009).

Research Questions

This study sought to answer the following research questions.

1. Is there is significant difference in the profit made by the ISO certified companies and the non-ISO certified companies?
2. Is there is significant difference in the profit made by the companies with overseas investment and those without overseas investment?
3. Is there is significant difference in the sales made by the ISO certified companies and the non-ISO certified companies?
4. Is there is significant difference in the sales made by the companies with overseas investment and those without overseas investment?
5. What factors affect the company profits?
6. Research Hypothesis

From the above research questions, the following hypothesis were generated and were to be tested so answer to answer the research questions.

H₀: There is no significant difference in the average profit made by the ISO certified companies and the non-ISO certified companies.

H_A: There is no significant difference in the average profit made by the ISO certified companies and the non-ISO certified companies.

H₀: There is no significant difference in the average profit made by the companies with overseas investment and those without overseas investment.

H_A: There is significant difference in the average profit made by the companies with overseas investment and those without overseas investment.

H₀: There is no significant difference in the average sales made by the ISO certified companies and the non-ISO certified companies.

H_A: There is no significant difference in the average sales made by the ISO certified companies and the non-ISO certified companies.

H₀: There is no significant difference in the average sales made by the companies with overseas investment and those without overseas investment.

Research Questions

H_A: There is significant difference in the average sales made by the companies with overseas investment and those without overseas investment.

H₀: There are no factors that significantly affect the profits of a company

H_A: There are factors that significantly affect the profits of a compan

Description of the methodology

In 2008, the National Bureau of Statistics of China conducted an Economic Census of the service firms. A total of 5717 companies were selected for this study. The sampling and data collection was based on the records from the registrar of companies.

For analysis, both descriptive and inferential analysis were employed to analyse the data.We begin by looking at the descriptive statistics.

Statistics
	sales	profit	age of company in years
N	Valid	5717	5717	5717
Missing	0	0	0
Mean	11698.57	2067.97	7.62
Median	4205.00	692.00	6.00
Mode	1500	300	2
Std. Deviation	32873.609	7158.417	7.074
Skewness	11.328	19.254	3.540
Std. Error of Skewness	.032	.032	.032
Kurtosis	188.002	602.738	17.849
Std. Error of Kurtosis	.065	.065	.065
Minimum	1000	17	2
Maximum	869176	296176	61
Percentiles	25	2273.50	313.00	3.00
50	4205.00	692.00	6.00
75	8953.50	1542.00	9.00

As can be seen, the average sales for all the companies in the sample was found to be 11698.57 while the average profit was 2067.97. The maximum profit made by the companies was 296176 while the minimum profit was 17. In terms of company age, the average age of the companies was found to be 7.62 years with the oldest company being 61 years old and the youngest company being 2 years old.

Frequency Tables

certification dummy
	Frequency	Percent	Valid Percent	Cumulative Percent
Valid	not certified	5257	92.0	92.0	92.0
certified	460	8.0	8.0	100.0
Total	5717	100.0	100.0

Only 8% (n = 460) of the companies in the sample were ISO9000 certified. The remaining 92% (n = 5257) were not yet certified.

industry code 2
	Frequency	Percent	Valid Percent	Cumulative Percent
Valid	storage and transportation	392	6.9	6.9	6.9
Telecommunication	184	3.2	3.2	10.1
computer services	365	6.4	6.4	16.5
software	390	6.8	6.8	23.3
Business services	2722	47.6	47.6	70.9
Research and Development	222	3.9	3.9	74.8
Specialized technology services	1200	21.0	21.0	95.8
Technology exchange and promotion	242	4.2	4.2	100.0
Total	5717	100.0	100.0

In terms of the industry, business services were leading with almost half the companies sampled being in the business services (48%, n = 2722). Specialized technology services came second with 21% (n = 1200) while the rest of the sectors had less than 10% shares.

Results further showed that only 3% (n = 171) of the companies had overseas investment while the rest (97%, n = 5546) did not have overseas investments.

FDI dummy
	Frequency	Percent	Valid Percent	Cumulative Percent
Valid	NO FDI	5546	97.0	97.0	97.0
with FDI	171	3.0	3.0	100.0
Total	5717	100.0	100.0

 Inferential Analysis

Hypothesis Tests

Hypothesis 1:

H₀: There is no significant difference in the average profit made by the ISO certified companies and the non-ISO certified companies.

H_A: There is no significant difference in the average profit made by the ISO certified companies and the non-ISO certified companies.

Group Statistics
	certification dummy	N	Mean	Std. Deviation	Std. Error Mean
profit	not certified	5257	1865.26	6911.274	95.321
certified	460	4384.67	9237.036	430.679

Independent Samples Test
	Levene’s Test for Equality of Variances	t-test for Equality of Means
F	Sig.	t	df	Sig. (2-tailed)	Mean Difference	Std. Error Difference	95% Confidence Interval of the Difference
Lower	Upper
profit	Equal variances assumed	82.963	.000	-7.271	5715	.000	-2519.4	346.491	-3198.7	-1840.2
Equal variances not assumed			-5.712	504.965	.000	-2519.4	441.101	-3386.0	-1652.8

We performed an independent t-test in order to compare the average profits for ISO9000 certified companies and non-ISO9000 certified companies. Results showed that the average profits for ISO9000 certified companies (M = 4384.67, SD = 9237.04, N = 460) was significantly different from the average profits for the non-ISO9000 certified companies (M = 1865.26, SD = 6911.27, N = 5257), t (5715) = -7.271, p < .05, two-tailed. Essentially the results showed that the average profits made by the ISO9000 certified companies was significantly higher than that of the non-ISO9000 certified companies.

Description of the Methodology

Hypothesis 2:

H₀: There is no significant difference in the average sales made by the ISO certified companies and the non-ISO certified companies.

H_A: There is no significant difference in the average sales made by the ISO certified companies and the non-ISO certified companies.

Group Statistics
	certification dummy	N	Mean	Std. Deviation	Std. Error Mean
sales	not certified	5257	10132.88	29617.093	408.482
certified	460	29591.67	55356.924	2581.030

Independent Samples Test
	Levene’s Test for Equality of Variances	t-test for Equality of Means
F	Sig.	t	df	Sig. (2-tailed)	Mean Difference	Std. Error Difference	95% Confidence Interval of the Difference
Lower	Upper
sales	Equal variances assumed	203.848	.000	-12.334	5715	.000	-19458.8	1577.673	-22551.6	-16366.0
Equal variances not assumed			-7.446	482.255	.000	-19458.8	2613.154	-24593.4	-14324.2

We performed an independent t-test in order to compare the average sales for ISO9000 certified companies and non-ISO9000 certified companies. Results showed that the average profits for ISO9000 certified companies (M = 29591.67, SD = 55356.92, N = 460) was significantly different from the average sales for the non-ISO9000 certified companies (M = 10132.88, SD = 29617.09, N = 5257), t (5715) = -12.334, p < .05, two-tailed. Essentially the results showed that the average sales made by the ISO9000 certified companies was significantly higher than that of the non-ISO9000 certified companies.

Hypothesis 3:

H₀: There is no significant difference in the average profit made by the companies with FDI and the companies with no FDI

H_A: There is no significant difference in the average profit made by the companies with FDI and the companies with no FDI.

Group Statistics
	FDI dummy	N	Mean	Std. Deviation	Std. Error Mean
profit	NO FDI	5546	1972.15	6795.467	91.249
with FDI	171	5175.64	14377.919	1099.507

Independent Samples Test
	Levene’s Test for Equality of Variances	t-test for Equality of Means
F	Sig.	t	df	Sig. (2-tailed)	Mean Difference	Std. Error Difference	95% Confidence Interval of the Difference
Lower	Upper
profit	Equal variances assumed	61.417	.000	-5.780	5715	.000	-3203.5	554.2	-4290.0	-2117.0
Equal variances not assumed			-2.904	172.350	.004	-3203.5	1103.3	-5381.2	-1025.8

We performed an independent t-test in order to compare the average profits for Companies foreign direct investments (FDI) and those that don’t have FDI. Results showed that the average profits for Companies with FDI (M = 5175.64, SD = 14377.92, N = 171) was significantly different from the average profits for the Companies with no FDI (M = 1972.15, SD = 67.9547, N = 5546), t (5715) = -5.780, p < .05, two-tailed. Essentially the results showed that the average profit made by Companies with foreign direct investments was significantly higher than that of the Companies with no foreign direct investments.

Hypothesis 4:

H₀: There is no significant difference in the average sales made by the companies with FDI and the companies with no FDI

H_A: There is no significant difference in the average sales made by the companies with FDI and the companies with no FDI.

Group Statistics
	FDI dummy	N	Mean	Std. Deviation	Std. Error Mean
sales	NO FDI	5546	11102.08	31260.733	419.768
with FDI	171	31044.36	63819.717	4880.416

Independent Samples Test
	Levene’s Test for Equality of Variances	t-test for Equality of Means
F	Sig.	t	df	Sig. (2-tailed)	Mean Difference	Std. Error Difference	95% Confidence Interval of the Difference
Lower	Upper
sales	Equal variances assumed	88.329	.000	-7.855	5715	.000	-19942.3	2538.9	-24919.5	-14965.0
Equal variances not assumed			-4.071	172.52	.000	-19942.3	4898.4	-29610.9	-10273.7

We performed an independent t-test in order to compare the average profits for Companies with foreign direct investments (FDI) and those that don’t have FDI. Results showed that the average sales for Companies with FDI (M = 31044.36, SD = 63819.72, N = 171) was significantly different from the average sales for the Companies with no FDI (M = 11102.08, SD = 31260.73, N = 5546), t (5715) = -5.780, p < .05, two-tailed. Essentially the results showed that the average sales made by Companies with foreign direct investments was significantly higher than that of the Companies with no foreign direct investments.

Statistics

Factors that affect profit

Model Summary
Model	R	R Square	Adjusted R Square	Std. Error of the Estimate
1	.163a	.027	.026	7064.375
a. Predictors: (Constant), age of company in years, FDI dummy, certification dummy

ANOVAa
Model	Sum of Squares	df	Mean Square	F	Sig.
1	Regression	7795143201.202	3	2598381067.067	52.066	.000b
Residual	285109503948.541	5713	49905391.904
Total	292904647149.743	5716
a. Dependent Variable: profit
b. Predictors: (Constant), age of company in years, FDI dummy, certification dummy

Coefficientsa
Model	Unstandardized Coefficients	Standardized Coefficients	t	Sig.
B	Std. Error	Beta
1	(Constant)	952.390	139.672		6.819	.000
certification dummy	2190.952	345.642	.083	6.339	.000
FDI dummy	3324.092	548.755	.079	6.058	.000
age of company in years	110.203	13.297	.109	8.288	.000
a. Dependent Variable: profit

A regression analysis model was constructed to see how the various factors influence the profit of a company. Results showed that only 2.7% of the variation in the profit is explained by the three variables (dummy for ISO9000 certification, dummy for FDI and age of the company.

Discussion and managerial advises

In this study we sought to analyse the relationship between Adoption of ISO9000 with other factor players in China’s service industry. The analysis was based on the data from the National Bureau of Statistics of China gave the following main results;

• The profit made by the ISO9000 certified companies was higher than that of the non-ISO9000 certified companies
• The sales made by the ISO9000 certified companies was higher than that of the non-ISO9000 certified companies
• Only a very small proportion (8%, n = 460) of the companies studied have so far undergone ISO9000 certification.

Based on the above key findings, the following recommendations are made;

• There is need for an intensive national drive and sensitization of various companies to undergo ISO9000 certification.
• The government to put strict and adequate measures for companies being registered to ensure they are ISO9000 certified so as to ensure quality of service offered to the citizens

Limitations and directions for future research

This study is limited to the fact that the study only based itself on the companies in China alone. Future study should focus having a varied sample from different countries. The sample could be stratified into low income countries and developed and countries. This will help ooze out any bias that might arise as a result of heterogeneity of the data from different countries.

References

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Santos, G., & Millán, A. (n.d.). Motivation And Benefits Of Implementation And Certification According ISO 9001–The Portuguese Experience. International Journal for Quality Research, 7(1), 71-86.

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