Domestic quality certification and growth of Vietnamese MSMEs

Elisa Calza & Micheline Goedhuys

#2018-026

Using two waves of the Mirco, Small and Medium sized Enterprises (MSMEs) survey of Vietnamese manufacturing firms, this paper first explores what drives firms' decision to have a domestically recognized 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, these serving as signaling devices for desirable attributes under information asymmetry and thus leading to an increase in legitimacy and reputation. Evidence is indeed found for a signaling effect of certification, this being stronger for more recently adopted certificates, for advertising firms and for women entrepreneurs.

JEL Classifications: D22 D23 L25 O12

Keywords: Certification, Firm growth, Transaction costs, Signaling Emerging economies, Viet Nam