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

Abstract

Using two waves (2013, 2015) of the Micro, Small, and Medium sized Enterprises (MSMEs) survey of Vietnamese manufacturing firms, this paper first explores what drives firms’ decision to have a domestic standards certificate, taking into account a rich number of factors related to the cost and expected benefits of certification as well as institutional factors. It further explores the presence of a positive and significant effect of domestic certificates on firm growth, testing whether these serve as signalling devices for desirable attributes under information asymmetry. Evidence is indeed found for a signalling effect of domestic standards certification, being stronger for female-run businesses. Results hold even when controlling for international certifications.