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Using private management standard certification to reduce information asymmetries in corrupt environments
Author(s) -
Montiel Ivan,
Husted Bryan W.,
Christmann Petra
Publication year - 2012
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.1957
Subject(s) - certification , distrust , credibility , language change , transaction cost , business , value (mathematics) , government (linguistics) , database transaction , accounting , public economics , industrial organization , economics , finance , management , political science , art , linguistics , philosophy , literature , machine learning , computer science , law , programming language
This paper investigates how corruption in the institutional environment influences firms' decisions to obtain third‐party certification to private management standards as signals of desirable conduct. We argue that policy‐specific corruption erodes trust in government efforts to regulate firms' conduct, thus increasing the signaling value of private certifications and the likelihood of certification. However, widespread corruption in the general environment can extend distrust to private certification systems, which reduces the credibility and signaling value of private certifications, thus decreasing the likelihood that firms obtain certification. Our empirical results based on ISO 14001 environmental management system certification among 433 automotive plants in Mexico confirm these relationships. We discuss the implications of our findings for transaction cost economics, institutional theory, research, and practice. Copyright © 2012 John Wiley & Sons, Ltd.