Why firms lose their ISO 9001 certification: Evidence from Portugal

Abstract

More than one million certified companies must choose, every three years, whether to renew or to withdraw from ISO 9001 certification. This paper investigates whether ISO 9001 decertification decision is driven by economic motivations. Using standard event-study methods, the paper looks into this question by comparing the abnormal performance of a sample of Portuguese firms that lose their certification with that of similar, non-event, firms. The paper finds no statistically significant differences in the economic performance of these two sets of firms in their post-ISO certification period. Such evidence suggests that economic underperformance is not the reason why companies are ISO-decertifying and further suggests that the decision to decertify is economically irrelevant. The study advances possible explanations for this (ir)relevancy and puts forwards implications for theory and for the ISO 9001 governance system. The governance system must change in order to increase the economic benefits that organizations can expect to gain from ISO (re)certification. This is the first study assessing the impact of ISO 9001 certification on firms that subsequently lost the certificate.

The Sustainable Effect of Operational Performance on Financial Benefits: Evidence from Chinese Quality Awards Winners

“…Prior studies that discussed the performance of quality management practices (e.g., TQM or quality certification) were inconclusive. One stream of the studies considered that quality management practices can improve the sales or profit [4,5,7], while some research showed that quality management practices may bring large costs [18] and the effects will not last for a long time [19]. We provide two explanations for these contradictory results.…”

“…For example, the ISO 9001 standards require detailed documentation of production processes, and maintaining this certification costs substantial resources. Nearly 60,000 firms purposely lose ISO 9001 certifications each year to save the registration and implementation costs [18]. From this perspective, firms may not obtain the expected financial benefits if their revenue cannot offset the influence of the cost of quality certification.…”

“…To fix this problem, we use second data from public financial data and a novel research approach-the PSM-DID-model to explore the effects of quality awards on firms' ROA. Previous studies may have used the event-study method to match the awarded firms with non-awarded firms [3,4,18]. Nonetheless, our method can provide a more accurate way to match samples by giving samples a propensity score.…”

“…Moreover, the cost to obtain and maintain quality certificates is substantial. For example, Cândido et al [18] mentioned the following phenomenon, "certification withdrawal", where nearly 60,000 firms deliberately lost ISO 9001 certificates to save resources and budget. In addition, researchers have demonstrated the deteriorating effects of quality management practices on firms: certified firms may lose their advantages in process management [19] and customer satisfaction [30] in five years.…”

¿Son los establecimientos hoteleros y de restauración fieles a las certificaciones de los sistemas de gestión de calidad?

“…Los motivos de que la ISO 9001 haya dejado atrás la fase de crecimiento puede estar en el abandono de las certificaciones, pero también en las barreras de entrada o en la reducción del atractivo para las restantes empresas no certificadas (Zimon y Dellana, 2019;Simon y Kafel, 2018;Cândido et al, 2019;Kafel y Simon, 2017;Sansalvador y Brotins, 2015). Profundizando en ese ámbito, otros trabajos analizan el impacto que tienen sobre las empresas la cancelación de esta certificación (Alič, 2014;Cândido et al 2016).…”