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ERIC Number: EJ910060
Record Type: Journal
Publication Date: 2011
Pages: 25
Abstractor: As Provided
ISSN: ISSN-0276-8739
Growing Exports by Signaling Product Quality: Trade Competition and the Cross-National Diffusion of ISO 9000 Quality Standards
Cao, Xun; Prakash, Aseem
Journal of Policy Analysis and Management, v30 n1 p111-135 Win 2011
Trade policy is an important topic in global public policy. It is recognized that trade is hampered when buyers have incomplete information about the offered products, a problem accentuated in the international markets by the physical and cultural distances between buyers and sellers. Buyers look for proxies to assess product quality, and exporters that can provide assurance about quality gain a competitive advantage. Our paper focuses on voluntary or private regulatory programs that have emerged as important instruments to correct policy failures. We examine how trade competition motivates firms to signal quality by joining ISO 9000, the most widely adopted voluntary quality certification program in the world. Methodologically, our study is novel because we observe trade competition at the bilateral and the sectoral levels. Structural equivalence, the measure of competition we introduce in this paper, captures competitive threats posed by actors that export similar products to the same overseas markets. We study ISO 9000 adoption levels from 1993 to 2002 for 134 countries, and separately for non-OECD countries and non-EU countries. Across a variety of specifications, we find that trade competition drives ISO adoption: The uptake of ISO 9000 is encouraged by ISO 9000 adoption by firms located in countries that are "structurally equivalent" trade competitors. Given that information problems about product quality are likely to be more salient for developing country exporters, we find that trade competition offers a stronger motivation for ISO 9000 adoption in non-OECD countries in relation to developed countries. (Contains 1 figure, 5 tables, and 29 footnotes.)
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Publication Type: Journal Articles; Reports - Research
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A