The Causal Impacts of International Standard Certifications on Firm Performance: Evidence from Malaysia
DOI:
https://doi.org/10.56532/mjbem.v5i1.151Keywords:
Standardisation, Firm’s Performance, EndogeneityAbstract
The objective of this study is to examine the causal effects of international standards certification (ISC) on the performance of Malaysian firms, while accounting for potential endogeneity between ISC and firms’ performance. Previous studies have rarely accounted for endogeneity between ISC and firms’ performance, which may bias estimates and lead to incorrect conclusions about their causal relationship. This study uses data from the World Bank Enterprise Survey (WBES), 2019-20. The estimation methods account for the endogeneity between ISC and firms’ performance by combining instrumental variables with treatment-effect modelling. Three performance measures are used: sales and gross profit per employee, and the cost of goods sold scaled by sales. The analyses, both univariate and multivariate, demonstrate that ISC improves the performance of Malaysian firms, especially manufacturing firms; however, the finding is not supported for firms in the service sector. Foreign ownership also improves firms’ performance. In terms of endogeneity, the cost of goods sold and performance are endogenously related, whereas sales and gross profit per employee are not.
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