HOW CORRUPTION INFLUENCES COMPANIES' OWNERSHIP OF QUALITY CERTIFICATES IN EMERGING MARKETS: A FIRM-LEVEL ANALYSIS
This paper examines how corruption influences companies’ ownership of quality certificates in emerging markets, with special focus on the manufacturing industry. Quality certification is becoming a common industry practice for companies to establish the quality of their products and services. Companies are motivated to seek certification to comply with regulations and signal their product quality. However, certificates are granted by the national accredited institutions. In emerging markets, weak rule of law and poor governance lead to rampant corruption in public organizations. Previous studies investigate corruption’s impact on innovation and companies’ management, rarely addressing how it affects quality certification. This paper uses data from World Bank Enterprise Surveys, to create a sample of 17,945 observations from 22 emerging markets. The resulting analysis suggests that there is a significant negative relationship between corruption and firm’s likelihood of owning a globally-recognized quality certificate. The presence of corruption would, on average, lower the likelihood of such certification by 4.3 percentage points. It is therefore incumbent upon companies and governments in emerging markets to formulate and implement effective policies to ensure accountability and create a better business environment.
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