The Impact of ISO 9000 Diffusion On Trade and FDI: A New Institutional Analysis

The Impact of ISO 9000 Diffusion on Trade and FDI: A New Institutional Analysis Author(s): Joseph A.
Clougherty and Micha Grajek Reviewed work(s): Source: Journal of International Business Studies, Vol. 39, No. 4, Institutions and International Business (Jun., 2008), pp. 613-633 Published by: Palgrave Macmillan Journals Stable URL: http://www.jstor.org/stable/25483290 . Accessed: 20/02/2013 07:03
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Business Studies of International Journal (2008)39,613-633
^L
The and
on diffusion impact of ISO 9000 FDI: A new institutional analysis
trade
MichaJGrajek3
7 Wissenschaftszentrum
Joseph A Clougherty1'2
and
Berlin (WZB), Germany; 2CEPR, London, UK; 3ESMT European School of and Technology, Berlin, Germany Management Correspondence: jA Clougherty, Germany. Wissenschaftszentrum Berlin
50, Berlin 10785, (WZB), Reichpietschufer
Abstract The effectsof ISO 9000 diffusionon trade and foreigndirect investment (FDI) have gone understudied. We employ panel data reported by OECD nations over the 1995-2002 period to estimate the impact of ISO adoptions on country-pair economic relations.We find ISO diffusion to have no effect in developed nations, but to positively pull FDI (i.e., enhancing inward FDI) and positively push trade (i.e., enhancing exports) indeveloping nations. journal of InternationalBusiness Studies (2008) 39, 613-633. doi: 10.1057/palgrave.jibs.8400368
Keywords: theory of FDI institutional environment and the MNE; trade flows; transaction cost analysis;
Tel: +49 30 25491 427; Fax: +49 30 25491 444;

E-mail: clougherty@wzb.eu
INTRODUCTION
The Geneva-based was constituted post-World War the International Organisation in 1946. However, unlike II for Standardisation of the other many
institutions international (e.g., the United the World the International Health Nations, IMF, Bank, or the International Civil Aviation Organisation) Organisation, this organisation has experienced itsmost striking success over the last two decades. The ISO 9000 certification system for firm quality was in 1987, and by the end of 2002 some 560,000 introduced certificates had been awarded to sites in 159 nations (Corbett, In short, ISO 9000 referred to simply as ISO 2003). (sometimes here) certification for firm quality has been far and away the most and widespread successful set of standards implanted by the International Organisation for Standardisation & Hancke, (Casper 1999; Mendel, 2002). The remarkable spread of ISO has spawned a recent literature that attempts to define what drives the global diffusion of certification to ISO 9000 (e.g., Corbett, 2003; Guler, Guillen, & Macpherson,
Received:
31
14 November 2006 Accepted: 31 August 2007

Online publication date:
Revised:
January 2006
14 February
2008
environmental & Taylor, 2001; Corbett processes: e.g., Christmann & Kirsch, 2001; Delmas, & Potoski, 2006, Prakash 2000, 2002; With to ISO 9000 standards focus of this study), 2007). regard (the several diffusion drivers have been identified: the role of govern ment directives (particularly the EU); government agencies man multinational dating contractor adoption; enterprises requiring and extensive adoption by supplier adoption; trading partner and economic trading competitor nations. Yet the macro-level impact of ISO 9000 certification has been an under-investigated topic.
2002; Mendel, 2002) and to ISO 14000 (a sister standard for
614
^_Impact
of ISO 9000
on trade
and FDI
A Clougherty and Michat Joseph Grajek_
at the macro-level drivers of and at the but instead diffusion, adoption on economic of ISO 9000 impact adoption country pair economic relationships. More specifically, we are interested in how the adoption of ISO 9000 ISO 9000 standards
We
aim
to look not
involved asymmetries with arm's length interactions between businesses from different nations trade) (thereby enhancing and with
economic cross-border activity. ISO 9000 - via common standards their quality-signalling, poten language, and conflict-settling properties costs involved with trade and FDI tially alter the activity. In short, ISO 9000 may reduce the trans action costs and information
and foreign direct investment (FDI)) bywhich firms

conduct
influences
the two primary means
(trade
The range of Phelan, & Berg, 2003). Guisinger, institutional factors is, accordingly, exten potential sive: from the well-studied importance of political on executive constraints discretion that secure property rights (e.g., Henisz, 2002; Henisz & Zelner, to exploratory on how notions antitrust 2001) policy might impact on FDI (Brewer, 1993; Li & Resnick, 2003). A striking omission is the in the above status list of location
tax regulations) policies, political stability, and have been identified in the literature as prominent location 2003; (Li & Resnick, Sethi, advantages
in international engaging greenfields, ventures and QVs) joint acquisitions (thereby FDI). enhancing as follows in order to is organised This paper the analysis. We support begin by setting the research question in the international business (IB) literature, giving credit to new institutional econom ics (NIE) insights as conceptually and fundamental,
and political the general excel lence of managerial practice in that same environ ment. While the empirical literature on FDI drivers mana has the of importance neglected context also
natural
of managerial practice advantages in the host nation environment. Clearly, foreign investors will consider not only factors such as the resources, human in a country, but resources
supporting the ISO 9000 system as representative of an international institution. Next, we consider the properties of ISO 9000, and generate formal proposi tions with respect to how diffusion may directly impact on country-pair trade flows and FDI stocks. Further, we analyse the potential for the ISO effect to the depend on country-pair type: that is, whether proposed describe and
tion on
and standards, these factors have gerial practice been explored conceptually. For instance, Dunning that commercial infrastructure and (2001) notes business culture enhance location attractiveness. Consider also the IB scholarship that stresses the
effects hold systematically. We the panel data, discuss estimation empirically test the impact of ISO 9000 conclude
country-pair economic
then
issues, adop
Final
ly,we
and discuss.
relationships.
A NEW INSTITUTIONAL ANALYSIS OF ISO 9000 INAN IB CONTEXT

are inherently IB researchers factors that affect cross-border interested economic in the relation the
in firms and reside nation's also capabilities industrial networks, and that IB researchers often role played ignore the important by resources in firms. Consider also the call by Ricart, embedded Hart, and Khanna (2004) for Enright, Ghemawat, to embrace the importance of the JIBS community specialised consummate tion with institutions that help intermediaries: transactions by reducing the informa costs involved and transaction asymmetries resources embedded the relevant identifying
& Kogut, 1997) examine the geogra host these skills of skills. While country phical pull are typically considered to be embodied in worker that a and observe Anand capabilities, Kogut (1997) 2005; Anand
existence of FDI motivated by MNEs looking to access resources to and hence gain capabilities: some studies & Mitchell, Anand, (e.g., Capron,
and conceptualise both contextualise impor the factors: in particular, tance of institutional envir of host-country advantages location-specific onments represent the key influence as to where as they create takes place, foreign production climates that facilitate an MNE's exploiting owner Both and internalisation advantages. ship-specific factors (e.g., market non-institutional size, market costs, transporta growth, labour costs, production and and distance) tion costs, natural resources, factors (e.g., governance institutional structures, trade barriers, FDI-specific policies, macroeconomic
ships.Dunning's (1981, 1988) OLI paradigm helps
diffusion
interest resides in how the diffusion of - the ISO 9000 practices recognised internationally standard for quality management impacts on the countries. between economic By relationships 9000 ISO of the impact considering empirically on both
in firms. Our main
FDI and trade in international we hope to add to environments, country-pair IB literature on location advantages. the extensive - and akin to the recent IB literature Furthermore - we that identifies firm-based sources of capabilities
Journalof International Business Studies
_Impact of ISO 9000
on trade and
FDI
A Clougherty and Michat Grajek_T* Joseph
615
that drives FDI and trade decisions. further into our analysis of ISO Before delving us to ground 9000's potential impact, it behoves our analysis two via additional institutionally means. First, we must lay out how institutions are considered
think it is important to consider firm properties and In our case, intermediaries. the role of institutional a in of firms the overall particular properties role environment and the intermediary national the ISO 9000 system might impact on played by of the macro-level cross-country phenomenon trade and FDI. In short, we argue that the diffusion of internationally practices recognised managerial and to natural, human in a country - in addition an resources represents important factor political
there may be an actual increase in cost control". We neglect better [and/or] quality in part because the internal benefits, many scholars (e.g., Juran, 1999; Simmons & White, 1999; 9000 have found ISO certifica 1998) Walgenbach, tion not to impact on actual quality or efficiency: and also because Delmas they expect quality Terziovski, Power, and Sohal (2003) improvements. sense of the mixed internal perfor begin to make mance record for ISO 9000 by observing that firms at early stages of the quality process may find to spawn internal benefits, but com certification (2002) notes irrespective of whether that firms seek ISO 9000 actual
as that perspective scholars, by NIE on how alternative forms of governance (focusing on transaction costs) represents our core economise establish theoretical backdrop. Second, we must - at least that the ISO 9000 system is an institution an informal-decentralised international institution - in order to an in such engage analysis.
panies with good quality systems may find ISO to internal losses owing to the added costs, generate and burdensome documents for necessary delays, of certification. Nevertheless, internal benefits any to ISO 9000 would be seemingly complementary the external benefits. Furthermore, in our empirical internal and set-up we cannot distinguish between
Institutional Economics is The work of Robert Coase and Oliver Williamson to the NIE perspective. fundamental Coase (1937) identified transaction costs as explaining why some were done within firms and not by exchanges on markets. Williamson (1975, 1985) expanded Coase's and work by identifying individual opportunism action costs. Institutions play as they reduce scholarship, and bounded rationality as heightening trans a critical role in NIE
New
blems
metries),
viding dependable economic exchange
uncertainty by pro for efficient frameworks
(North, 1990). The "new insti in organisational tutionalism" theory and sociol one concern has with the NIE ogy particular our is to that institutions germane approach study: and organisations do not necessarily lead to bene ficial outcomes & Powell, 1991; Scott, (DiMaggio institutionalism holds that Instead, new 1995). actors often construct institutions that never mani fest the desired outcomes. For instance, DiMaggio and Powell (1983: 147) state that "forms of organi zation
is well suited to system as the NIE approach sense of institutional remedies for transac making tion cost and information asymmetry problems - the heart of our interest in ISO's potential beneficial impact on FDI and trade.We move forward then with 9000
costs and information asym with new institutionalism's is often not and realised), critique (efficiency consistent with the literature on ISO's internal benefits (a mixed performance record). In sum, we engage in an NIE analysis of the ISO consistent
benefits: hence the internal benefits may in our results. Yet neglecting the potential internal benefits of ISO adoption is consistent with our NIE approach (focusing on the external pro factor of transaction
external
the idea that institutions (and the ISO 9000 system in emerge or take specific forms to solve particular) and facilitate commerce. Yet we remain problems new to institutionalism's open charge that new forms not generate as an North devised the intended consequences. Institution
may
ISO 9000 Douglas
International
make
1004) observe "both because
that change occur as the result of processes more necessa similar without organizations them more efficient". rilymaking In line with the NIE approach and new institu tionalism critique, we base our theoretical justifica tions on the external - not the internal - benefits of ISO 9000 certification. Hudson and Jones (2003: that ISO 9000 may generate is more effectively quality benefits signaled
as institutions (1991: 97) defines constraints that structure eco humanly nomic interaction and consist of both informal constraints
(e.g., sanctions, taboos, customs, tradi and formal rules to tions, and codes of conduct) create order and reduce uncertainty in exchange. Hence the of both formal recognising importance and informal institutions represents an important NIE breakthrough (Henisz & Williamson, 1999), as prior scholarship generally neglected institutions by taking a formal-legalism informal approach
616
^2__Impactof ISO 9000
on trade and
FDI
A Clougherty and Michai Grajek_ Joseph
to institutional
analysis
1990). Accordingly, nature decentralised very much an institution. King, Lenox, and Terlaak concur when (2005) they surmise that the ISO management decentralised standards institutions. represent examples
(Yarbrough & Yarbrough, and the voluntary despite of the ISO 9000 system, it is
of
1994). Addi tionally, ISO diffusion reportedly received a great boost by the EU's use of the standard to accelerate of a single market (Anderson, Daly, & establishment 1999; Conti, Johnson, 1999). At the firm level, it has the that businesses consider argued or of sales maintenance international improvement as an adoption motivation (Guler et al., 2002; If above motivations Simmons & White, the 1999). are founded on accurate assessments of certification been
to develop to facilitate standards trade in goods and services (Hayes,
international
the ISO 9000 system as an inter Understanding institution can be enhanced by considering national econo international political the discourse within my
(IPE). The domain of IPE focuses on the social, that impact and economic arrangements political, on the global systems of production and exchange: conditions institutional that is, which promote international cooperation (Strange, 1988). For IPE international scholars, regimes (i.e., international institutions)
benefits, then ISO 9000 diffusion should generate trade at the macro-level. enhanced international our research focus resides in the macro While it behoves level effects of ISO 9000 diffusion, us to consider the foundations behind the micro way in which ISO certification affects relation that hail from different businesses ships between the nations. Foss and Pedersen (2004) underscore mecha IB in of explanatory importance identifying and Snowdon nisms at deeper levels. Additionally,
that agreements represent multilateral behaviour, regulate relations, promote cooperative order in particular and stabilise the international - in and Powell issue areas. DiMaggio (1991) impact on IPE surveying new institutionalism's institutions are formal note that some international are others while complex sets of rules, organisations,
and Powell further standards and agencies. DiMaggio note that regimes are institutions in that they build and reproduce standard expec upon, homogenise, IPE scholars could consider the tations. Accordingly, International its ISO 9000 and for Standardisation Organisation an as international standard regime. nature yields ISO's decentralised Furthermore, estimation benefits the dichotomous
1995: 195). Accordingly, (Murray, Kotabe, & Wildt, we focus on three particular (quality properties language, and conflict settling) by signal, common trade between which ISO adoption may enhance firms from different nations trade. and thereby enhance
in actual beha constructs theoretical grounding is viour. Basing our theoretics on micro foundations do" trade firms as not but do "nations pivotal,
Stonehouse (2006) highlight the importance of
Consider
members
to join to an institution attempting from non behaviour different exhibit probably of joining. A decen with no ambition members on the choices of tralised institution that depends us to elicit a finermeasure firms allows local myriad to institutional commitments of effective national of ISO diffusion the the In short, greater principles. the a the in 9000 greater country, practices in that to those managerial commitment principles national environment.
for empirical testing. institu nature of most that is, you are either in or out. tional conditions: as crucial to his cites this dynamic Rose (2004) no significant impact on to WTO have the finding trade flows. One of the problems with a dichot is omous measure for institutional membership in variation that it cannot significant capture non for example, commitments: institutional some
country-pair First, ISO 9000 firms can credibly claim that they have a documented system that is imple quality are mented and followed, ensuring that products & to made Rice, (Guerin exacting specifications and Solis (1997) Rao, Ragu-Nathan, 1996). While evidence find cross-national supporting ISO certifi on firm quality, as cation impacting positively the that Conti (1999: 458) reports quality assurance in business-to-business 9000 elements of ISO help relations "when a supplier's capability contractual to design and supply conforming products need to Terlaak and King (2006) argue be demonstrated". that ISO can signal a firm's superior but unobserved attributes: in line with this argument, they find ISO to increase certification facility growth when face suppliers, and the attributes multiple buyers are intangible. of suppliers Foreign suppliers of difficulties manifest clearly intermediary products in demonstrating informational, product quality: and cultural, managerial regulatory, linguistic, barriers all conspire to enhance "liability of foreign from foreign ness" when one considers purchasing
The
the formation of the stated objective behind was for Standardisation International Organisation
COUNTRY-PAIR TRADE FLOWS
_Impact of ISO 9000
on trade and
FDI
A Clougherty and Michat Grajek_;_j_ Joseph
617
reducing the search costs involved with identifying quality-valuing foreign suppliers. ISO certification has been Second, reported to involve common-language properties that facilitate communication between businesses Hancke, 1999; Dissanayaka, ensures Kumarsawamy, (Casper Karim, has that &
tion help reduce trade barriers between businesses from different nations, and thus facilitate trade by
In short, ISO 9000 offers a "low-cost" suppliers. a to quality. Accord firm's commitment of signal of ISO certifica the implications ingly, signalling
& Marosszeky, 2001; Grajek, 2004).

certification codified that an documented
ISO 9000
a is
and by doing so mini organisational production, mise inter-organisational conflict. Accordingly, the of ISO certification conflict-settling properties help trade barriers between reduce from businesses different nations that procedures reduce instances by setting reasonable working smooth inter-firm relations and
conflict. As evidence, Hayes (1994: 56) reports that ISO firms consider certification to signal that they are "easier to deal with". The ISO working proce dures help of labour and clarify the division inter involved with responsibilities complex
ISO can help clarify situations where faults are un intended and not due to opportunistic behaviour, thus preventing of inter-organisational escalation
organisation
Not only does ISO 9000 provide purchasers with a means a firm's quality commitment, to decipher but also the purchasing firm is freed from designing and paying for the system properties common-language represent an efficient improvement tion where each business customer requirements (Hayes, of ISO upon 1994). 9000 The thus
system quality management into a comprehensive manual (Mendel, an certification establishes 2002). Consequently, to both efficient means communicate internal systems to customers and provide a common pro to be used across organisations. cedural language
of conflictual hold-up. In sum, ISO 9000 helps standardise practices and mobilise and structure resources, terminology, efforts across The quality-signal, organisations. and conflict-settling properties common-language, lower the transaction costs and information asym involved with business-to-business across borders, thus making arm's trading relations less costly. tions
metries
rela
length
the situa
and Hancke adoption. (1999: 968) argue Casper that ISO "makes links between different production units more and, hence, more transparent easily to amenable Consider how improvement". Matthews from Williamsonian (1986) departs the purely cognitive opportunism by emphasising costs of organising and monitoring transactions even when are honest. participants Accordingly,
standards. separate country-specific the of Accordingly, common-language properties ISO certification help reduce trade barriers between businesses from different nations by allowing for the of a firm's production ready communication system, and by eliminating costly multiple quality standards. Third, codified procedures a la ISO 9000 may help settle - and reduce - organisational disputes, as the of the documented authority system can "be employed overtly in everyday battles of organiza tional contestation" 2002: Lee (Mendel, 414). (1998) reports "better team spirit" and "less staff as prominently conflict" cited benefits of ISO comply
specifies unique for quality control. For instance, ISO by US auto firms for supplier relations adoption eliminated three other quality standards (Anderson et al., 1999). In this vein, Chen, Otsuki, and Wilson (2006) empirically support that exporters concen trate on fewer foreign markets when they must with
the above discussion is that Implicit throughout ISO's mitigation of the transaction-cost and is most for germane problem bounded-rationality the home country (what we sometimes refer to as the "push adoption quality and reliability of exports (the quality-signal, and effects); common-language conflict-settling we home-nation diffusion of ISO hence, expect certification to robustly "push" exports in various ISO 9000 in the host country-pairs. adoption nation refer to as the "pull (what we sometimes and effect') should involve the common-language discussed above; properties conflict-settling yet the are more quality-signalling implications likely to be absent for the host effect. In general, home-nation firms would be likely to exhibit, at best, moderate concern as to whether customers were ISO certified or not; instead, selling firms are simply generally to sending their products to whoever is open to the In we other pay willing words, going price. that ISO adoption matters more on hypothesise the selling end than on the end of the buying transaction. From the micro foundations outlined we three macro-level above, generate propositions: la: Home-nation diffusion of ISO Proposition 9000 certification (the selling end) is likely to enhanced generate exports within country-pair economic relationships. trade. ISO 9000 effect') in country-pair in the home-nation signals the overall
618
_5__Impactof ISO 9000
on trade and
FDI
A Clougherty and Michat Grajek_ Joseph
Proposition generate economic Proposition robust
lb: enhanced
Host-nation
diffusion
of
ISO
9000 certification (the buying end) is likely to

exports within country-pair relationships. lc: The impact of home-nation
(2004) implicitly argue that the role of essential intermediaries - which help consum institutional mate transactions by evaluating quality and match - is a ing potential buyers and sellers place to begin for selection drivers. target looking We submit that ISO 9000 quality with identifying "quality purchase or JV with. We do not consider signal that reduces
diffusion (the selling end) is likely to be more

in magnitude than the impact diffusion (the buying end). of host
nation
certification provides a the search costs involved firms to either valuing" ISO 9000
COUNTRY-PAIR FDI POSITIONS

While we have focused to this point on the effects and Perkins (2005: of diffusion on trade, Neumayer 239) note that the goal of ISO 9000 "has been to faci litate international trade and investment by harmo
stocks by affecting foreign investment costs. Recall owned that FDI consists of both JVs and wholly - where can owned subsidiaries subsidiaries wholly or We be obtained via acquisition analyse greenfield. the potential impact of ISO adoption on FDI while the same three ISO properties: quality considering and conflict settling. language, signal, common we how ISO 9000 certi More analyse specifically, fication tion lowers the transaction costs and informa
diverse and conflicting national nising otherwise standards with international ones". Accordingly, ISO also impact country-pair FDI 9000 diffusion may
We
certification to be the ultimate standard of produc tion quality, nor the only indicator that firms use to for search for JV and acquisition partners: witness, is for a the fact that ISO certification instance, itwill be plant or premise and not a firm. Hence - a on the nature of the transaction depending and Jones (2003) noisy signal at times. Yet Hudson not must full standards that generate highlight or information on the part of buyers to confidence be helpful; instead, as long as they convey some and are cost-efficient, information they become set. one signal included in the optimal signalling argue that ISO 9000 represents an important the information barriers and signal that reduces costs with transaction regard to finding foreign to engage in with which firms (or plants/premises)
firms making involved with asymmetries to explore the investments. By attempting foreign ISO certification how micro foundations behind in JVs, acquisitions theoretical proposi tions on deeper-level explanatory mechanisms. of ISO 9000 the First, properties quality-signal as high FDI in firms assist decisions, making may reduces and the costs of engaging greenfields, we base our information
inability to detect which can be valuable ment
barriers to undertaking greenfield FDI

firms in the host
the impact of forms of FDI, ISO 9000 diffusion may also impact on greenfield on type investments. Almost all forms of FDI rely to provide internal markets host-environment one the chief of Yet process inputs. production environ
and M&As. partnerships While the analysis above highlights ISO 9000 on the JV and acquisition
is the
barriers exist regarding the assessment of foreign firms' quality properties. To the degree that ISO 9000 represents a low-cost signal of a firm's to quality, this impacts directly on the commitment in international costs of engaging JVs and acquisi tions. Recall that inadequate (and target evaluation is decision an insufficient pre-acquisition process) and a factor in failed acquisitions often credited as & Jemison, 1991; Hitt, Harrison, JVs (Haspeslagh 2006). Ireland, & Best, 1998; Srivastava & Datta, it clear that For instance, Hitt et al. (1998) make was of Chemlawn Ecolab's unsuccessful acquisition and worker low managerial driven by Chemlawn's discovered only post something productivity to the Related practice of neglecting acquisition. (2006) recently pointed Singh target evaluation, scholars have failed to delineate out that business the actual drivers of target selection. Ricart et al.
by suppliers upstream inputs: this represents one of quality providing liabilities of foreignness, and is the the principal local firms seek to acquire reason why many and contacts and through acquisitions knowledge in trade our the constructs to Akin section, JVs. host-nation
FDI in making assist firms interested may Cart scholars that many Recall decisions. (e.g., 1990; Larsson & 1993; Hunt, wright & Cooper, 1986) 1994; Shrivastava, 1999; Pablo, Finkelstein, the represents integration agree that inadequate failure important factor in explaining single most the integration and JVs. Moreover, in acquisitions from different nations units of firms and/or 9000
ISO 9000 diffusion reduces the search costs involved with identifying good local suppliers in lowers the costs of engaging and, by so doing, FDI. greenfield-type the common-language Second, properties of ISO
_Impact of ISO 9000
on trade and
FDI
A Clougherty and Michat Grajek__^ Joseph
619
owing to the distance generates further challenges in culture and managerial (Brown, practices 2001; 1989; Fey & Beamish, Rugman, & Verbeke, a great deal of 1988). Nevertheless, Geringer, research
firms to enhance finds similarity between success and (e.g., thereby enhance integration Brown et al., 1989; Datta, 1991; Fey & Beamish, 2001; Harrigan, 1988). Coff (2002) sums the above up well when he argues that you need some type of related
the & Jemison, 1991). Accordingly, Haspeslagh for substantive formal controls necessary integra tion may breed resentments on the part of acquired - resentments that manifest firms' employees in poor morale, themselves stress, employee increased absence, employee turnover, and lowered
and to successfully acquire experience (2001) integrate strategic assets. Fey and Beamish founda the organisational go further to uncover tions behind the positive relationship between firm similarity and successful In particular, losses of JVs and integration find Beamish and Fey
1993). Larsson (Cartwright & Cooper, productivity out that and Lubatkin (2001) point acquiring firms a trade-off between face "properly integrating" and the new acquisition "harmoniously acculturating" - an acquirer, simply put, cannot have both. In fact, recent research suggests that the greatest employee resistance is elicited when the success of the inter firm combination depends on gains from integrat similar and marketing production operations ing & the above Finkelstein, 1999): hence (Larsson trade-off ismost present exactly when integration is We
acquisitions. differences
in managerial
trol systems, and difficulties over organising work: costs increase hence substantially organisational when you attempt to integrate dissimilar organisa tional climates via an M&A or JV.
generate process ineffective communication,
to and values practices losses that derive from over con uncertainty
most
and JVs. acquisitions fully integrate) international The assist firms properties common-language with regard to inter-firm cooperation by enhancing communication, reducing uncertainty with regard to control systems, and providing a common app roach to organising work. In support of this conjec ture, Bergman (1994) provides healthcare industry where examples similarity in quality management the integration of new JVs and systems eased
We submit that ISO 9000 certification provides a common routine, shared (i.e., common language similar climate, etc.) that helps firms experience, consummate from different nations (i.e., success
that less change is necessary for target-firm employ ees: hence less conflict results from integration. to the common-language Related pre properties will ISO-certified firms discussed, viously target have systems in place to gain information that allow and
necessary. submit that ISO certification may mitigate the noted above conflicts (i.e., employee resistance) to take place and allow without integration tensions. This dynamic substantial is due to ISO certification on the part of target firms, meaning
firm the acquiring take control: thus less
resentment-augmenting change is required during In fact, Larsson the integration and process. Finkelstein (1999) support manage empirically ment style similarity to increase both organisa tional integration and employee and cooperation, further find that organisational
Further, Shani and Rogberg's (1994) acquisitions. case-based research finds ISO 9000 in helpful on internal the addressing change brought by a a In ISO 9000 short, merger. provides language that use can entities to inside and peer integrating communicate with each other, and thus aids the all-important integration process. Third, the conflict-settling properties of ISO 9000 may assist firms interested inmaking FDI decisions. we While covered above the pivotal need for is to succeed, integration integration if a JV or M&A is often fraught with tensions for the employees of enti acquired firms or junior JV partners. Acquired
be cushioned" of (1999: 8). Thus the cooperation the new employees allows interaction and coordi nation to take place, which in turn increases the likelihood of success. In short, by smoothing nations integrating firms from different resistance (attenuating employee yet ISO 9000 certification lowers allowing integration), the costs of engaging in international JVs and relations between
and integration generate merger employee cooperation synergies. Larsson and Finkelstein conclude that "when man the agement styles are similar across organizations, level of cooperation is often enhanced and percep tions of the degree of change taking place may
ties are customarily required to alter their organisa tional style substantially: that is, they bear the brunt of the change in terms of operations, control, and even and systems planning procedures, resource issues (Buono & Bowditch, human 1989;
that ISO's mitigation proposed transaction costs involved with trade would be more robust for home nations (the selling end) than for host nations (the buying end). The of the
acquisitions. We previously
620
*"_Impact of ISO 9000
on trade and
FDI
disproportionate however,
with FDI the buying end (now the home and the selling-end nation) (now the host nation) are reversed. To illustrate the imbalance between and home-nation the host-nation effects, consider the quality-signal benefits of ISO diffusion on FDI. ISO diffusion in reduces the search
selling end is likely to be replicated for FDI;
effect of ISO 9000 diffusion on the
Proposition
2b:
Host-nation
diffusion
of
ISO eco
FDI within generate enhanced nomic relationships.
9000 certification (the selling end) is likely to

country-pair
"quality-valuing" with, or source inputs from (i.e., the costs of foreign JVs, and greenfields are all reduced): acquisitions, in the host ISO adoption thus we would expect to FDI via the country quality robustly "pull"
the host-nation environment costs involved with identifying local firms to either purchase, JV
2c: The impact of host-nation diffu Proposition sion (the selling end) is likely to be more robust in than the impact of home-nation magnitude diffusion (the buying end).
COUNTRY-PAIR HETEROGENEITY
An analysis of how ISO 9000 impacts on FDI and trade in country-pair economic relationships cannot end with the idea that the effects of ISO diffusion
with
firms from the home country. are Host-nation firms interested in being acquired to 9000 of certification value ISO fully unlikely ISO-certified home-nation
signal effect. Yet the diffusion of ISO in the home affect environment nation should significantly itwould be in the interest only JV-type FDI, where firms to make of host-country efficient pairings
hold universally. We must also factor in the like lihood that ISO's proposed effect on FDI and trade across in different country-pair may vary intensity (2004) types. In a recent paper, Blonigen and Wang focus
suitors; instead, price will be the to judge suitors. criterion by which overwhelming in A target firm will be relatively uninterested an acquiring firm can signal the degree to which its quality, the bottom be given to of dynamic in interested relatively more that is, no price discount will ISO-certified bidders. The same type will be present for greenfield-type to host-nation suppliers are unlikely and line: ISO-certified and non-ISO MNEs interested in buying
that it Thus Blonigen and Wang deliver the message to assume that FDI plays the same is inappropriate as it does in developed nations role in developing it is not the focus of their research, a nations. While & Shapiro, 2003; few IB researchers (Globerman Sethi et al., 2003) have also found the impact of their constructs on FDI to vary substantially explanatory nations. and developing between developed There
it is of whether directly on the question to pool data empirically from different appropriate nations; moreover, they find that "the underlying factors that determine the level of FDI activity vary across and DCs" LDCs (2004: 17). systematically
FDI, where between discriminate certified home-nation
and greenfields: the quality-signal, common-language, the illuminate effects help and conflict-settling home-nation Yet for FDI. environment target few of ISO 9000 relatively provides adoption firms interested in mak benefits for home-nation the benefits are mostly ing foreign investments; restricted to home firms seeking international JVs. that ISO In other words, we again hypothesise more on the selling end than on adoption matters the transaction. From the micro of the buying end three outlined foundations above, we generate macro-level Proposition propositions: 2a: Home-nation diffusion of ISO
their products. of ISO 9000 host-nation adoption Accordingly, firms inte for home-nation benefits clear provides rested in engaging in international JVs, acquisitions,
that the Blonigen-Wang and Wu (2005) observe data auto not to pool cross-country prescription common is quickly becoming knowledge matically and practice. The Blonigen-Wang insight is new: for the developed/ theoretical hence justifications for the and distinction potential developing other distinction types (e.g., transition nations, colonial industrial countries, legacy) have newly are distinctions that other Mindful unstudied. gone our proposed ISO we consider whether possible, and developing for both developed effects hold nations. Furthermore, we proffer two theoretical be behind any might when it comes distinction developed/developing to ISO's influence on trade and FDI. and developing First, the fact that developed different to experience tend nations types of justifications as to what FDI and trade may contribute to any developed/
appears, then, to be empirical support for and the need to differentiate between developed nations when one studies FDI drivers. developing Indicative of the importance of this finding, Kobrin
FDI within generate enhanced nomic relationships.
9000 certification (the buying end) is likely to

country-pair eco
_Impact of ISO 9000
on trade and
FDI
A Clougherty and MichaJGrajek_"_}j_ Joseph
621
FDI distinction. Horizontal (foreign developing as the in the same industry abroad investment found firm's domestic when is industry) generally the home and host nations have similar attributes level (factor endowments, means in this size); practice, of development that FDI between and two
nations because
is generally found outputs from home production) home host the and nations have dissimilar when means that FDI from a attributes; in practice, this to a developing nation home host developed nation tends to be vertically based. Further, higher trade costs tend to generate lower levels of vertical a complement FDI: hence trade is often considered FDI. Accordingly, the fact that develop nations to tend ing experience more vertical-type relations in their trade and FDI, while developed nations relations experience more horizontal-type diffusion. for vertical
nations tends to be horizontally based. developed to costs trade tend Further, higher generate higher levels of horizontal FDI: hence trade is often a substitute for horizontal FDI. Vertical considered FDI (investment to source inputs or sell abroad
services financially, and the support such public banks and export market options commercial (e.g., are in the less evolved management companies) is world in this that ironic, developing developing nations are the very locations where such services would be most While Delmas valuable. (2002) that the world's lack of institu posits developing to tions might ISO diffusion, we want dampen point out that what diffusion actually taking place will involve significant effects owing to the dearth of other institutional means via which to reduce information
trade disproportionately with each other have the institutions that strong they trade governments security. Simply put, support in developing nations find it more difficult to
costs. and transaction asymmetries we the of influence ISO might expect Accordingly, to be most robust in developing as is this nations, where fewer substitutes exist. In sum, firms from developing nations will face substantial challenges in readily conveying product processes and conflict quality, internal production free relations for two reasons: the vertical nature of their international economic and the relationships, to of institutions mediate transaction shortage help and information ISO certification Thus asymmetry problems. of developing-world firms will be in attracting developed-world helpful
robust in vertical (i.e., in developing type economic relationships as this is where transaction cost and nations), information asymmetries can be most problematic. the fact that developed and developing Second, nations tend to differ with regard to the presence of institutional intermediaries also may explain impact
in trade and FDI, might influence the impact of ISO Recall that transaction cost and hold-up tend to be most in vertical germane problems are firms where and sellers relationships buyers We then ISO (Williamson, 1985). might expect certification's to be most
cost
particularly customers for exports and developed-world buyers for investment A simple proposition purposes. captures the argument above:
Proposition 3: The impact of ISO 9000 diffusion

on both trade and nations FDI developing than is likely to be greater in developed nations. in
commercial com banks, and export management often and panies perform information-gathering matchmaker services for firms desiring to expand overseas via exporting investment and/or (Hill, These services instrumental roles in 1998). play bridging the financial, logistical, business-practice, and cultural divides to IB. Yet these endemic services that help mitigate information asymme tries and transaction costs are less in the prevalent developing Marcouiller world. In (2002) argue this vein, Anderson and that capital-abundant
distinction. Ricart et al. any developed/developing note that nations often (2004) developing institutional voids of the (a shortage experience institutional intermediaries to needed specialised consummate in the of lack transactions): particular, soft institutions via which to locate possible transaction partners undercuts commerce. Consid er that government trade associations, agencies,
DATA ISSUES
Data for our empirical analysis are compiled from different sources, including the UN's Comtrade, the IMF's International Financial Statistics, the World Bank's World Development Indicators, and the World
Economic Forum's Global Competitiveness Report: see Table 1 for the full list of variable definitions and sources. The primary data consist of bilateral (i.e.,
trade flows and FDI stocks over the country-pair) 1995-2002 FDI data come period. Our bilateral from OECD nations who FDI report bidirectional stocks for their economic with both relationships non-OECD and OECD nations. the Accordingly, home nations and host nations for the various include 52
economic country-pair relationships OECD and non-OECD members.
622
^_Impact of ISO 9000
on trade and
FDI
A Clougherty and Michal Joseph Grajek_
Table 1 Variable definitions Variable Source Definition Exports fromhome to host country (inmillions of US dollars) Home country's FDI stock inhost country (inmillions of US dollars) Host country's FDI stock inhome country (inmillions of US dollars) Home country'sGDP (inmillions of US dollars) Host country'sGDP (inmillions of US dollars) Number of home ISO 9000 certifications Number of host ISO 9000 certifications Number of passengers carried by aircrafts departing fromhost country's Total networkof paved roads per km2 inhost country Host country's electricity production (in kWh per capita) Real effectiveexchange ratebased on relativeconsumer prices (highervalue indicates realdepreciation of home vs host currency) Relative stockmarket indexgiven by market capitalisation of home relative
to host airports per capita
UN's Comtrade Exports OECD StatisticalCompendium OECD StatisticalCompendium IFS IMF's IMF'shost_GDP IFS ISO (2003) homeJSO ISO (2003) hostJSO World Bank's WDI host_Passengers FDI_out FDI_in home_GDP host_Road World Bank's WDI host_Electricity World Bank's WDI IMF's IFS rel_REER World Bank's WDI rel_SMI host_Polcon host_TCI host_Tariffs host_FCM host_HF Henisz (2002) Index
value
of political constraints inhost countrybased on veto points (higher

indicates tighter control over politicians' decisions)
country
World Economic Forum's CCR OECD StatisticalCompendium

and World Bank's WDI
Trade cost index reflecting hidden barriersto imports of host country (1=highest, 7=lowest) Custom and other import duties as a fraction of total imports inhost
country; OECD data were used
World Economic Forum's CCR World Economic Forum's CCR
Restrictions to access foreigncapital markets inhost country (1=highest,

7=lowest)
ifavailable,
otherwise
World
Bank's
data.
Hiring and firing practices inhost country (1=impeded by regulations, determined 7=flexibly by employers) BIT UN Bilateral investment treatybetween home and host nation (0/1) FTA Baier and Bergstrand (2007) Free trade agreement between home and host nation (0/1) and sources listedthere
data - not US or Scandi employ the OECD on FDI stocks in order to ensure sufficient navian variation in terms of home-nation ISO adoption, and to allow investigation of both the push and of ISO 9000. The OECD Statistical pull performance reports both FDI flows and stocks, but Compendium we employ the stock data, as the flow data involve We repatriation
can lead to of profit issues, which a of particular nation's inappropriate measurement foreign investment position. Hejazi Additionally, and Safarian (2001) point out that stock data have the added Our of mitigating advantage issues between FDI and trade. variables aim simultaneity stan
for common Country-pair specific effects account border, common ties, and other language, colonial factors that do not vary over the sample unobserved
and capital costs of firing practices), (presence bilateral investment to restrictions treaties, and 2 reports Table access). foreign capital market summary statistics for our full list of variables. An array of other factors is implicitly taken into account of fixed country-pair and period effects. by means
effects account for variation period. Period-specific in world GDP and other annual trends. One trade-off involved with the extensive list of control variables is that each variable contains observations.
explanatory and FDI activities factors driving export ISO 9000 effects: the beyond proposed gravity force infrastructure carried, (airline passengers (GDP), and electricity production), road network, paved dard
to control
various
the miss Moreover, missing for control do not observations each variable ing the number of feasible obser line up. Accordingly, vations drops significantly (by over 90%) when the full set of control We mations.
financial and wealth conditions (relative exchange risk market index), political and relative stock rate, costs trade index), (Henisz's (2002) veto-points (tariff and non-tariff barriers to trade, and presence labour costs (hiring and of free trade agreements),
between
in the esti is included variables then face a trade-off between having a a rigorous estimation and having large sample with controls. Our model multiple procedure a balance to needs therefore strike specification the sample selection problem and the
_Impact of ISO 9000
on trade and
FDI
A Clouqherty and Michai Grajek_^J_^ Joseph
623
Table
Summary
statistics
LDC-+DC
Obs. Variable Mean Std. dev Obs.
DC^LDC DC^DC
Mean Std. dev Obs. Std. Mean dev
home_GDP host_GDP hostJSO

host.Passengers
968 Exports 2038.7 170.7 1043 FDI.out 950 FDI_in 1423.6 1043 224,847 1043 1,002,276 3302 1043 homeJSO 1043 14,732
875 1.01
4116.6 397.9 2351.9 229,507 1,206,128 6827 17,537

0.58
1796 1858 1099 1858 1858 1858 1858

1858
1908.4 1492.8 194.9 1,442,356 214,753 14,789 3039

0.45
5924.5 3760.9 574.3 2,350,017 232,848 16,952 6835

0.81
1271 1315 1204 1315 1315 1315 1315

1315
5996.0 7069.7 7399.8 1,313,508 1,196,615 12,054 11,182

0.93 1.43
14,076.2 21,027.4 23,227.0 2257,529 1,921,242 15,493 16,123
host_Road host_Electricity rel_REER host_Polcon hostJTCI host_Tariffs host_FCM
167.6 647 8292.0 1043 584 0.99 915 rel_SMI0.99 0.77 1043 1043 5.82 741 0.01 999 6.48 1043 host_HF 3.40 690 BIT 0.42 690 FTA 0.12
91.8 4493.8 0.16 2.53 0.05 0.68 0.01 0.38 0.92 0.49 0.33
1348 1858 1112 1576 1804 1858 1225 1858 1838 1198 1198
65.2 3373.6 1.03 139.81 0.61 4.69 0.03 4.95 3.94 0.48 0.10
111.0 2031.3 0.16 934.99 0.23 0.90 0.03 1.19 0.91 0.50 0.30
1315 1315 1315 1042 1315 997 1121 954 997 957 957
85.3 118.0 9936.6 0.12 1.00 17.11 0.04 0.76 0.79 5.85 0.01 0.01 0.47 6.37 0.94 3.71 0.05 0.00 0.48 0.63
6056.1 62.48
benefits of variables.
including
an
extensive
set of control
ESTIMATION ISSUES
We system of two gravity In order to FDI and for both exports. equations two it estimate the gravity equations properly, us to return to the nature of the FDI behoves as this directly determines trade relationship, the for the two equations. proper estimation technique build and estimate a
could all create a positive correlation between trade and FDI. A more recent empirical literature takes into account the above issues and con endogeneity tinues the debate over 2000; Clausing, ability (see Belderbos is particularly he identifies Head the complementarity (see Ries, 2001) or substitut & Sleuwaegen, 1998; Blonigen, &
2001) of trade and FDI. The Blonigen (2001) study

data, important: using product-level substitution (as well as complemen trade and FDI. He suggests that the tarity) between inability of some researchers to find substitution an aggregation rests both with bias and with substitution effects being a sudden - not gradual -
scholar country pairs). Recall also that empirical FDI to outweigh vertical FDI: ship found horizontal hence scholars were surprised when early empirical - not a work found a complementary substitutable trade between and FDI relationship (Hejazi & Safarian, 2001). Grubert and Mutti (1991) began the these findings by pointing process of reconciling out that much of that empirical work suffered from by regressing exports endogeneity of direct investment activity. More on an indicator specifically, driven be the
As already alluded to, it is appealing to consider the trade-FDI to be substitutable where relationship horizontal FDI dominates (e.g., developed-devel where country pairs), and complementary oped vertical FDI dominates (e.g., developed-developing
complementarity findings may by in tastes, technology, unobserved variation com and government parative advantage policy, which
will also be at play in our complementarity seen level data. As this below, country-pair pulls us in two different econometric directions. The substitution argument roughly corresponds to idealised horizontal FDI - or, more specifically, to the decision on whether to supply a foreign market with arm's length trade or foreign-subsidiary sales. The relative costs associated with the two types of this decision. determine foreign presence mode From the econometric trade flows and viewpoint, - for FDI are not interdependent example, FDI does
forward with phenomenon. Accordingly, we move the idea that trade and FDI exhibit a substitutive that can best be detected via exogen relationship ous price indicators - though we are mindful that
624
"***_Impact of ISO 9000
on trade and
FDI
A Clougherty and MichaJ Joseph Grajek_
idealised horizontal world, but are jointly determined, which leads naturally to Zellner's unrelated (1962) seemingly regressions each control variable Moreover, (SUR) model. which directly affects the cost of at least one foreign presence mode appears in both the FDI and export since what matters in choosing between equations, substitutes is relative costs. The resulting SUR model will then have identical regressors. Error terms are also likely to be correlated across the two equations to omitted variables (the factors affecting owing trade might also affect FDI via the substitution shocks. argument) and common
not
cause
trade - in an
being located in different nations owing to produc tion efficiency. Complementarity between trade and FDI leads to a different econometric specification
The complementarity argument corresponds bet ter to a state where cross-border economic activity is vertical in nature, driven by parts of the value chain
not be able to distinguish would the direct effect of ISO diffusion on exports from the indirect effects of ISO diffusion on exports via FDI. uncorre Another involves assuming possibility cted error terms across equations, thus leading to a as a of model known special type triangular "recursive model". the recursive model, the With are in the FDI right-hand-side parameters equation
could interpret of a reduced approach form model. correct, a econometrically Although reduced-form model presents difficulties in inter In particular, we coefficient estimates. preting this previous
of
and estimating the SUR model with equation) of drivers abroad via exogenous operating exports or FDI represents one possibility. Grubert and Mutti such an approach, and in light (1991) advocate our we discussion, as the estimation
decision:
first, you establish foreign subsidiaries for home second, you source the sourcing production; with subsidiaries inputs and then re-import foreign a direct causal In other words, goods. processed FDI and trade exists between relationship as FDI outward vertical world, idealised in an stocks
from that for the substitutability of exports and FDI In this case, the decision (i.e., the horizontal world). tomove production abroad comes prior to the trade
identified owing to exogeneity of the independent variables. Hence FDI serves as its own instrument in as it is a linear combination the export equation, of error and the FDI equation's variables, exogenous term is uncorrected with the export equation's error term. Yet the uncorrelated-errors assumption in the is a strong one, which would be violated
trade flows. "cause" both incoming and outgoing Yet no reciprocal causality exists in this context, as trade does not cause FDI. This implies a triangular model (Lahiri & Schmidt, 1978) in the econometric context: FDI variables but trade variables appear in the export equation, in the FDI do not appear
should be effects in the export equation FDI inward and outward the through the than other rather variables, explana through however, as the tory variables. We stress "should," indirect channelled broad
shocks presence of omitted variables and common to trade and FDI. An additional benefit of such an approach is that the complementarity-driven
equation. to separate out the horizontal As we are unable and vertical-type activities in our country-pair level account our model must data, simultaneously two models the for both activities. Unfortunately, identical SUR with regressors, and triangular estimated be nested and consistently cannot further restrictions. without in a single model a triangular model requires generally Estimating
nature of the FDI data (not distinguishing between vertical and horizontal FDI) suggests that the vertical effects may be difficult to control fully. in mind the potential pro endogeneity Bearing we The FDI the follow recursive approach. blem, and export equations then read In FDI?UT =
X'ijtymi
+ Kt + fy +
xj,ijt
(1)
InEXPORTS^ HSxlnTOlgF
+ X,^EXP + /J2lnFDlg?
+ h + mi+ etjt
(2)
of instrumental variable techniques the application - in the current to account for endogeneity context, of FDI in the export equation. The the endogeneity nature of the trade/FDI horizontal relationship, what that however, impacts on trade will suggests also impact on FDI, thus rendering identification of the export equation parameters impossible. the the vertical world (i.e., omitting Ignoring from the export inward and outward FDI variables
where
i, j, and t stand for home subscripts nation, host nation and year, respectively. In order the to apply estimation standard techniques, are log-linearised. and (2) (1) gravity Equations of all values the logged includes Vector Xyt across identical Additionally, equations. regressors we include time effects (Xtand Kt) and country-pair an approach allows specific effects (rjijand %). Such the
_Impact
of ISO 9000
on trade and
FDI
A Clougherty and Michat Grajek_'** Joseph
625
(2) with equation-by-equation Equations OLS after removing from the data the unobserved in the country-pair embedded speci heterogeneity transforma fic effects. Primarily, we use a within tion leading to fixed-effects estimators though, Further alternatively, we apply first differencing. to are robust estimations all regression more, (1) and and autocorrelation by using heteroskedasticity robust standard errors. that three additional We also need to acknowledge sources of endogeneity potentially exist beyond the of trade and FDI. First, the gravity interdependence as force itself is subject to endogeneity problems
error terms, and heteroskedastic for autocorrelated across equations. Under but not for correlation we can consistently estimate these assumptions,
(3) the ability tomake micro level; and concern (4) mitigated First, we run a Sims lead and porates mated equation
inferences with over reciprocal
regard to the causation. that incor in the esti significance
test procedure variables explanatory tests their joint
should realisations variable future explanatory not affect present exports and FDI. Finding such a a violation of the strict indicates relationship exogeneity estimators Hausman and renders fixed-effects assumption, a we inconsistent. Second, apply of the fixed-effects test to a comparison
(Wooldridge, 2002). The underlying logic is that
account in national exports necessarily enter GDP Levinsohn and Hummels (1995) report, how ings. with for GDP ever, that correcting endogeneity little difference instrumental variables makes very to coefficient estimates. Second, our research focus is on the macro-level impact of ISO diffusion on trade like to be able to make FDI, yet we would - the to the micro-level inferences with regard For trade and FDI decisions. that make agents some we of would instance, degree appreciate firms that confidence ISO-certified actually engage of the ISO in more exports and FDI. Exogeneity us to variables would allow interpret the coefficient and estimates
coefficients with the first-differencing coefficients. Under strict exogeneity, both estimators are con limit: thus sistent and have the same probability a the two difference between significant finding estimates indicates violation We 2002). (Wooldridge, variables as a group (see "overall" the explanatory in Table 3), and then for the two ISO variables in Table 3) of primary interest. (see "ISO" of strict exogeneity tests to all apply both
EMPIRICAL RESULTS
data follow a panel introduced, we for unobserved that allows accounting approach studies. cross-sectional heterogeneity pervading our main fixed-effects estimations (Table 3), Beyond we also estimate all regression while equations As already using
notes
this problem, try-pair level of analysis may mitigate as of FDI in one the level trade and however, a large to is less have particular country pair likely effect on national diffusion of ISO 9000. We apply Sims-type and Hausman-type exogeneity tests in order to support the above intuitions: (1) the validity of a recursive econometric (2) the likely trivial impact of gravity endogeneity; approach; forces on
that trade and FDI intensity (both of which indicate the openness of an economy) might the standardisation determine process. Our coun
to explain diffusion effects but attempts to explain diffusion drivers. For instance, Guler in trading-partner et al. (2002) find ISO adoption and trading-competitor and a nation's nations, overall inward FDI to enhance ISO 9000 diffusion in a particular country. Furthermore, Casella (1996) 9000
as indicating whether ISO-certified firms increased IB activity at the micro level. experience Third, endogeneity may owe to reciprocal causa ISO 9000 diffusion and both FDI and tion between literature on ISO Recall that the dominant exports. not
a first-differencing method (Table 4). Com in with the fixed detail paring first-differencing effects results allows us to check the robustness of
the primary fixed-effects estimations. Following and (2004), we distinguish between Blonigen Wang to three distinct types: developing country-pair to (LDC->DC); developed developed developing to developed and developed (DC->LDC); (DC-? in our sample The 20 developed nations DC). include Australia, France, Austria, Canada, Denmark, Iceland, Ireland, Italy, Germany, New Zealand, Norway, Portu Japan, Netherlands, gal, Spain, Sweden, Switzerland, UK, and the US. each table presents six specifications: Accordingly, one trade and one FDI equation for each country that we do not have observation pair type. Note number symmetry for the trade and FDI equations in the different country-pair types, as an effective observation inward equation requires both outward FDI measures, and bidirectional FDI data are not always present. Nevertheless, our main results are robust to the imposition of observation and symmetry for the trade and FDI equations trade Finland,
number
626
^_Impact of ISO 9000
on trade and
FDI
Table
Gravity
equation
for exports
and outward
FDI:
fixed-effects
estimation
results
ExportsFDI
LDC->DC DC^LDC
no. (1) Regression home_GDP host_GDP homeJSO hostJSO FDLout FDLin

host.Passengers
DC-*
DC
LDC->DC
DC-+LDC
DC-+DC
(2) 0.237
(3) (4) 0.288**
(5) (6) -0.354 -0.360 0.174
0.272**
(0.121) (0.240)
0.116** 0.085
0.803***
(0.158) (0.076)
0.033
0.650***
(0.125)
-0.008
0.523***
(0.293)
0.568 -0.079
(0.286)
-0.059
0.536***
(0.311) (0.320)
0.064 -0.022
0.850***
(0.087)
0.043
(0.588) (0.097)
(0.176)
0.148**
(0.057)
-0.004
(0.050)
0.018
(0.037) (0.033)
0.005 (0.011) 0.016 (0.010)
0.289*** -0.099 -0.004
(0.087)
(0.016) 0.043
-0.330*
(0.126) (0.071)
(0.104)
(0.031)
0.021 (0.023) 0.023* (0.013)
0.212***
(0.190)
(0.112)
(0.029)
-0.363
(0.078)
host_Road
(0.100)
0.006*
(0.187) (0.007) (0.528)
(0.339)
host.TCI (0.393)
host_FCM
-0.577
0.263***
(0.003) 1.210**
0.406*
Sims test (overall)3 Sims test (ISO)9 Hausman test (overall)6 Hausman test (ISO)b R2 Observations Clusters (Panels)
1.35 (7, 162) 2.19 (2, 162) 22.26*** (7) 6.74** (2) 0.227
(0.076) 1.30 (8, 216) 0.48 (2, 216) 31.92*** (8) 1.69(2) 0.323 868 918 218 278
1.02 (8, 244) 0.65 (2, 244) 39.61 *** (8) 1.63(2) 0.220 1136 1043 295 233
(0.223) ** 2.31 (5, 224) 2.12 (2, 224) 16.06*** (5) 4.33(2) 0.070
0.63 (6, 390) 0.05 (2, 390) 6.44 (6) 2.07(2) 0.250 1858 410
1.02 (6, 275) 1.15 (2, 275) 3.03 (6) 0.19(2) 0.207 1315 318
cluster-robust standard errors are in parentheses. *p<0.1; **p<0.05; ***p<0.01; All variables are in logs; country-pair-specific and time-specific effects are suppressed. aThe test statistic is F-distributed; degrees of freedom are in parentheses, h'he test statistic is /-distributed; degrees of freedom are in parentheses.
- that where we have is, deleting the observations FDI data but no trade data. Furthermore, since all in the estimated Equations variables (1) and (2) are in logs, we can interpret the coefficients in Tables 3 The period and the country are for the fixed effects suppressed pair specific effects estimations. and The 4 as elasticities.
that strikes a balance between process) In the and rigorous estimation. sample selection first step we selected only the control variables that the central ISO and gravity forces beyond were statistically significant in the particular FDI selection estimations (the unreported equations was one variable when control above) only we elimi included at a time. In the second step nated, one by one, the control variables that turned in both the trade and FDI out to be insignificant and trade noted equations line with
trade-off between mentioned previously size controls and extensive along with sample us a choice to make limitations space requires to results which present. concerning empirical the estimations support empirical Unreported intro robustness of the ISO effects to the sequential one at a time; of all control variables duction to present yet such results are too cumbersome we a conservative take succinctly. Accordingly, approach (the "from general to specific" variable
for a given country-pair type: thus, in the substitutability of trade and FDI, we symmetry across trade and keep control-variable for each country-pair FDI equations type. As a the result, equation specifications reported in Table 3 that are symmetric across include control variables trade and FDI equations for each country-pair type
journal of International Business Studies
_Impact of ISO 9000
on trade and
FDI
A Clouqherty and Michat Grajek_]_}_ Joseph
627
Table
Gravity
equation
for exports
and
outward
FDI: first-differencing
estimation
results
ExportsFDI
LDC-+DC DC-+LDC DC-* DC LDC^DC DC-+LDC DC-* DC
no. (1) Regression

0.294*** home_GDP
(2)
0.474***
(6) (5) (4) (3)

0.589*** -0.211 0.260 -0.377
(0.064)
0.879*** host_GDP
(0.162)
0.559***
(0.133)
0.253***
(0.221)
0.802** 0.364*
(0.372)
0.326
(0.367) (0.427) (0.121)
(0.169)
0.063** homeJSO
(0.094)
0.089
(0.080)
-0.044
(0.399)
-0.023
(0.191)
-0.187 0.108
(0.028)
0.086 hostJSO -0.001 FDLout
(0.057)
0.004
(0.027)
0.062**
(0.053)
-0.045
(0.120)
0.109* -0.055
(0.032)
0.002
(0.059)
(0.027)
0.020*
(0.149) (0.061)
(0.121)
(0.010)
0.028 FDI_in
(0.022)
0.016
(0.011)
-0.008
(0.021)
host_Passengers
(0.016)
0.027
(0.012)
0.059 -0.184 -0.624
(0.052)
host_Road host_TCI -0.185 -0.240
(0.084)
0.008*** -0.005
(0.269) (0.011) (0.418)
(0.383)
(0.003) (0.154)
host_FCM 0.229*** 0.167
Observations Clusters (Panels)
0.133 fl2 613 159
(0.056) 0.216 524 217
0.100 625 761 1185 754 245 182 272 375
0.020
(0.215) 0.067
0.077
cluster-robust *p<0.1; **p<0.05; ***p<0.01; All variables are in logs and first-differenced.
standard errors are in parentheses.
and
significant
in at
least one
trade or FDI
indicate the severity of the pro diagnostics the results, we find endogeneity to blem. Reviewing be somewhat evident for the explanatory variables as a whole. The Sims tests for regression 4 and the tests for regressions Hausman 1-4 indicate endo geneity potential. As we have already pointed out, no easy solution exists for constructing instrumen ted variables owing to our inability to separate out vertical from horizontal activities with our data. we are to consistently unable Consequently,
equation. concern in Given that endogeneity is a potential our econometric 3 Table reports a series of analysis, that
in the core focus (the ISO confidence generate of the In short, the diagnostics effects) paper. our that suggest equations particularly the export equations equation and the
3 are mostly insignificant). Yet we generally find the ISO variables to be exogenous in the esti mated with the of ISO's equations, exception test in regression 1.While we must further Hausman consider the regression 1 indication, the diagnostics Table
estimate the hypothesised effect of vertical FDI on triggered trade flows: that is, the coefficient estimates on inward and outward FDI in the export are unreliable in equation (e.g., the FDI variables
importantly, do not appear to be the problem variables. The examination of coefficient estimates for the standard factors driving trade and FDI provides another validity check for our results. Here, we discuss the fixed-effects results for both the main and selected control variables: inward and GDP, outward FDI, infrastructure, hidden trade barriers, and capital market access. - the Interestingly, we find that our main controls work asymmetrically in the esti gravity forces mated equations: GDP pulls exports much stronger than it pushes exports. The strong pull effect on exports is stable across different country-pair types,
FDI developing-to-developed some suffer from yet, endogeneity; the ISO variables of primary concern
the relatively weaker home-nation though push effect is present only in the equations considering nations exports to developed (Table 3, regressions 1 and 3). These findings - strong pull and weak push
628
***_Impact of ISO 9000
on trade and
FDI
to the pre-existing literature empirical data to estimate using panel techniques gravity trade equations based (e.g., Freund & Weinhold, In terms of the FDI equations, the host 2004). nation GDP pull also seems relatively stable across conform
lack precedent theoretics. Additionally, we do not find the push (home-nation to be significant GDP) for the FDI equations in Table 3. Furthermore, our controls for FDI-driven trade - outward and inward - are FDI stocks in the trade equations mostly as expected, but for positive, only significant inward FDI Host-nation number nificant in regression 2. infrastructure, of airline passengers, as by the proxied is positive and sig for all country-pair
different country-pair in types, but is insignificant the developing-to-developed country-pairs (regres are weakest and we sion 4),where the econometrics
spurs both imports and FDI from developed nations. This conforms to the expectation that financial market openness reduces the cost of doing business for both importers and foreign investors. the performance of our control Having discussed
The positive and significant coefficient estimates in Table 3 for the exports and FDI equations (regres sions 2 and 5) suggest that lax restrictions regarding the access to capital markets in developing nations
foreign capital market access (host_FCM) affected cross-border economic significantly activities for developed-to-developing country pairs. Finally,
in the export equation and negative, types (except LDC-+DC), though in the FDI equations. Similar generally insignificant, results are found for the paved road network infrastructure variable, though
variables, we can finally turn to the impact of ISO 9000 diffusion on trade and FDI - the focus of the paper. Our empirical results yield evidence concerning our for how ISO diffusion would proposed expectations on impact cross-country economic relationships: to Propositions la and 2b, we expected According ISO diffusion at the selling end (the home nation for exports and the host nation for FDI) to
it appears that the tical-type trade. Furthermore, FDI negative effect of infrastructure on horizontal infra (via the substitution of trade for FDI when structure costs are low) is potentially countervailed by the positive effect of infrastructure on vertical FDI. - as measured trade barriers Hidden by the World Forum's Economic trade cost index (host_TCI) turned out
only in the devel country pairs. These oped-to-developed findings to the that infrastructure conform expectation and ver improvements boost both horizontal-type
increased trade and FDI respectively. generate some evidence in The empirical results provide in the developing-to favour of these propositions and the developed exports equation developed FDI equation. to-developing to Propositions lb and 2a, we expected According ISO diffusion at the buying end (the host nation to for FDI) for exports and the home nation FDI and increased trade generate respectively. as The empirical results reject these propositions, nowhere does buying-end trade or FDI. ISO diffusion enhance
to be significant in the developing-to FDI (Table 3, regression 4). equation developed in developed trade barriers Hence fewer hidden nations nations.
FDI from developing generate greater is consistent with While this estimate to FDI will respond positively how vertical-type the lowering of trade costs, it should be treated with extreme for a few reasons. As already caution, alluded to, econometric regression 4 performance Notice equations. poorest set of among that this is the only the Sims and Hausman indicates the our
to Propositions lc and 2c, we expected According ISO diffusion at the selling end to be more robust than at the buying end. The empirical results do some evidence in favour of the selling provide end effects being most robust. the ISO to Proposition 3, we expected According effects to be most The nations. pronounced results empirical
estimated
explanatory is also much The R2 in this equation variables. lower than in the other Table 3 regression equa for estimate the coefficient tions. Furthermore, trade barriers is not significant in the first hidden differenced estimations (Table 4, regression 4). The results are not surprising, given the inconsistent for FDI from lack of theoretical guidelines nations. to nations developed developing relative
for which both equation tests reject exogeneity of the "overall"
in developing strong provide as the in favour of this expectation, evidence positive effects of ISO 9000 on the selling end of - home nation for exports and the transaction - in the for FDI outward positions host nation developing world are confirmed.
in results presented the empirical In particular, areas diffusion ISO where Table 3 indicate three impacts on trade and FDI: home significantly host-nation in LDC->DC ISO nation exports; ISO in ISO in DC-*LDC FDI; and host-nation LDC->DC FDI. We turn now of these findings. to specific discussion
_Impact off ISO 9000
on trade and
FDI
A Clougherty and Michai Grajek_^}_^ Joseph
629
on estimate First, the fixed-effects coefficient is significant and posi ISO adoption home-nation tive in the developing-to-developed export equa tion (regression 1). The diagnostics point, however, of our strict exogeneity to some concern about
in general, and the exogene explanatory variables in particular: both Hausman of ISO variables the ity test statistics are significant. This calls for a detailed results examination of the first-differencing (Table 4) where the ISO push to-developed significant export equation coefficient estimate. in the developing is confirmed by a
certificate from Table 3 suggests that one additional an average nation in a developing generates in each worth of foreign investment US$69,600 - LDC DC country-pair relationship. for estimate the fixed-effect coefficient Third, in ISO is significant and negative host-nation FDI equations the developing-to-developed (regres sion 4). This result suggests that ISO diffusion in nations acts as a barrier to foreign invest developed discussion nations. from our Recall from developing of hidden trade barriers that regression 4 in terms both of is the most troubling estimation (the Sims and Hausman tests indicate
ment
Note
that the ISO
push effectis significantlylower inTable 4 (0.063) than inTable 3 (0.116), which might be due to the
ISO variable trending First differencing, by eliminating deter estimation. to such immune ministic time trends, is more effects. Moreover, effects and the difference between the fixed first-differencing coefficient estimates to the for home-nation ISO may also be due we not that lose is, samples fully overlapping: for the impact of other accounting in the fixed-effects omitted variables
econometrics
the significance of this effect studied). Moreover, does not hold up in the first-differencing estima tion (Table 4, regression 4): hence we treat this weak and puzzling result as a statistical artefact. In sum, our results support the hypothesised benefits of ISO 9000 common-language empirically trade and FDI (the quality-signal, adoption and conflict-settling properties) on the selling end of both manifesting
endogeneity) and of theoretics (FDI from the developing to the developed world is not well
observations when many first-differencing unba lanced panels (from 868 to 613 here). Wooldridge tests may be (2002) notes that positive Hausman due
to inconsistent the fixed sampling between effects and first-differencing estimations. The bot tom line is that we should treat the magnitude of reassured cient the ISO push effect in Table 3 with caution, yet be as to the significance of this effect. our coeffi in mind, the above caveats Keeping estimate that for the ISO push a 10% increase
transactions. Moreover, splitting the sample into different country-pair types, per Bloni (2004), elicits strong support for the gen and Wang of ISO diffusion in devel heightened importance nations. the emergence of the oping Accordingly, seems to be ISO institution in developing nations quite effective in solving the information asymme cost problems involved with try and transaction FDI and trade.
effect in Table 3 a developing in suggests nation's certificates to boosts average exports a in nations by 1.16% developed given year. This - at - one means that the LDC->DC sample mean an additional ISO 9000 certificate generates average US$71,600 worth of exports in each LDC-DC country-pair relationship. To obtain the same effect as a 10% increase in certificates, a developing nation's GDP would actually need to increase by 4.27%. the fixed-effects coefficient estimate on Second, host-nation ISO diffusion is significant and positive in the developed-to-developing FDI equation
CONCLUSION AND DISCUSSION

Motivated the by the lack of literature analysing we of set macro-level ISO 9000 diffusion, impact out to study the effects of a nation's ISO certifica tion on country-pair economic relationships. We three of ISO 9000 suggest properties (quality signal, common language, and conflict settling) that ease the costs of conducting cross-border trade and investment. We also posit that these ISO effects will be more robust in developing nations, as firms from these nations face particularly high informa tion asymmetries and transaction costs, both when to attract foreign exporting and when attempting investment. Empirical tests based on data covering the country-pair trade flows and FDI stocks of nations over the 1995-2002 period yield two findings:
(both the Sims and (regression 5). The diagnostics Hausman for the tests) also indicate exogeneity as a variables and whole for ISO the explanatory in particular; variables also, the first-differencing coefficient estimate in Table 4 provides corrobora tion. Hence ISO diffusion in developing host nations to attract FDI from appears developed nations. In terms of economic the significance, coefficient estimate (0.148) for host-nation diffusion
OECD
major
1. ISO 9000 diffusion in developed nations does not appear to enhance trade and FDI between nations.
630
**_Impact of ISO 9000
on trade
and
FDI
A Clougherty and Michai Joseph Grajek_
2. ISO 9000 appear nations) nations)
to enhance
in developing nations does trade (exports to developed and FDI (investment from developed between nations. diffusion
provide benefits
some
evidence
The empirical results yield several implications, four of which we discuss here. First, our results may contribute directly to the NIE that considers how institutions scholarship a is that to role that of other play complementary judges and champagne fairs helped further the effective ness of the "reputation system" used at that time to reduce the transaction costs of exchange. They state ... [a]mecha "institutions sometimes arise tomake effective by communicating informa et 1990: ISO The 9000 al., 19). (Milgrom an an to be insti of quality system appears example to aim is tution whose informa convey principal In the case of ISO, the tion to a community. tion" institutions. Milgrom, North, and Weingast found that the medieval institutions of (1990)
have recently expressed benefits of globalisation
Buckley & Ghauri, 2004; Eden & Lenway, 2001)

concern as to whether accrue to the relatively
of globalisation
as to where the principal amass. IB scholars (e.g.,
the rich
nism more
for practices to be beneficial hence the of diffusion developing global - not ameliorates managerial practices potentially of wealth. exacerbates global inequalities IB Fourth, our results speak to two additional on the location dialogues: dialogue long-lasting advantages, and the recent dialogue on institutional diffusion of ISO 9000 nations: The empirical results suggest that intermediaries can indeed play a funda In our case, the mental role in supporting commerce. diffusion of ISO 9000 managerial (an practices intermediaries. institutional
whereas stantially from globalisation, developing if nations few benefits. Our any experience results are striking, in that they support the global
or to the relatively countries (capital exporting) countries. poor (capital importing) Many pundits and scholars (see Dunning, 2003) have expressed the opinion that developed nations benefit sub
least in the developing world. The ISO 9000 system in realising its stated goal: may then assist theWTO to help of exporters, importers, and producers goods and services to conduct their business. our results also generate clear policy Second, we reconsi if nations for implications developing a from der our empirical country's per findings
inter consists of worldwide businesses community or ested in either exporting investing abroad, and - at the WTO ISO appears to complement system
in developing that ISO diffusion spective. Recall a was to have found nations positive push with to to nations, and not to developed exports regard to developed FDI outward push significantly nations was in nations. ISO diffusion developing
In other words, the impact of ISO problems. nations where 9000 is quite robust in developing few substitutes exist. because of institutional voids The ISO 9000 then, to be an system appears, based important
nations face that firms in developing prior wisdom substantial barriers to gaining both export markets and foreign investment interest owing to insufficient government or market remedies for transaction-cost
in international informal-decentralised institution) increased inward FDI nations generates developing from developed nations and enhanced exports to to the These conform nations. findings developed
also found to have a positive pull with regard to and not to inward FDI from developed nations, in from developed imports "pull" significantly this from a developing nations. country's Taking suggests the following: large-scale adop perspective increased exports to (but not tion of ISO generates increased from) developed imports significant inward FDI from (but not and increased nations,
the tant location advantage, which helps explain destination for FDI and the source of trade flows.
economic factor affecting cross-border institutions that thus international relationships: an impor quality may represent signal managerial
ACKNOWLEDGEMENTS
Michat financial sup Grajek gratefully acknowledges port from the German Federal Ministry of Education and Research (project 01AK702A). We appreciate the efforts of the special issue co-editors (Witold Henisz and substantive conversa and Anand Swaminathan)
FDI to) developed outward increased significant from a neo-mercantilist nations. Hence, (or devel in diffusion ISO developing viewpoint, opmental) the two public policy nations appears to generate inward increased and (increased exports goals
investment interest) that reside behind the foreign economic policies of many nations. on Third - and related to the above discussion - our results policy implications developing-nation
tions with Witold Henisz and Jean-Francois Hennart of the work. in the early development that helped Ken Derek Comments Scheve, Kellenberg, by Harbir Singh, Maurizio Zanardi, and seminar partici Business School/Imperial College, pants at Tanaka School of London School of Economics, Nijmegen
_Impact off ISO 9000
on trade and FDI
A Clougherty and Michat Grajek_^ Joseph
631
IUI inStockholm and the Conference on Management, the PE of Regulating MNCs & FDI at Penn State were the work. Kemal Azun, helpful in further developing
JenniferRontganger, Enno Schroder, Xitco provided excellent research

errors, however, are our own.
and Christopher assistance. Any
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and Logistics, und Showbusiness
A. S. 2003.
indus interdisciplinary (combining management, trial organization, and political and economy) in scope. This is his second contribu international tion to JIBS', he has also Journal Journal of of Economics, Industrial Organization, Strategic Management Journal, and others. He was born in Boston, Massachusetts, and is a US citizen. E-mail: clougherty@wzb.eu published International in Canadian
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ABOUT THE AUTHORS

A. of (PhD, Joseph Clougherty University is Senior Research Southern California) Fellow at theWissenschaftszentrum Berlin (WZB) and Fellow
Accepted by Anand Special Issue Editor and Witold Henisz,
and standardisation dynamics, compatibility, on with information and particular emphasis was communication in He born technologies. a Warsaw and is Polish citizen. E-mail: (Poland) grajek@esmt.org
Special Issue Editor and Departmental Editor, 31 August 2007.
organization,
Swaminathan,
This paper has
been with the authors for two revisions.

The Impact of ISO 9000 Diffusion On Trade and FDI: A New Institutional Analysis

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The Impact of ISO 9000 Diffusion on Trade and FDI: A New Institutional Analysis Author(s): Joseph A.

Business Studies of International Journal (2008)39,613-633

on diffusion impact of ISO 9000 FDI: A new institutional analysis

50, Berlin 10785, (WZB), Reichpietschufer

Tel: +49 30 25491 427; Fax: +49 30 25491 444;

14 November 2006 Accepted: 31 August 2007

2002; Mendel, 2002) and to ISO 14000 (a sister standard for

A Clougherty and Michat Joseph Grajek_

and foreign direct investment (FDI)) bywhich firms

the two primary means

A NEW INSTITUTIONAL ANALYSIS OF ISO 9000 INAN IB CONTEXT

ships.Dunning's (1981, 1988) OLI paradigm helps

in firms. Our main

Journalof International Business Studies

_Impact of ISO 9000

A Clougherty and Michat Grajek_T* Joseph

viding dependable economic exchange

uncertainty by pro for efficient frameworks

ISO 9000 Douglas

1004) observe "both because

Journalof International Business Studies

^2__Impactof ISO 9000

A Clougherty and Michai Grajek_ Joseph

to develop to facilitate standards trade in goods and services (Hayes,

Stonehouse (2006) highlight the importance of

COUNTRY-PAIR TRADE FLOWS

Journalof International Business Studies

_Impact of ISO 9000

A Clougherty and Michat Grajek_;_j_ Joseph

& Marosszeky, 2001; Grajek, 2004).

Journalof International Business Studies

_5__Impactof ISO 9000

A Clougherty and Michat Grajek_ Joseph

Proposition generate economic Proposition robust

9000 certification (the buying end) is likely to

diffusion (the selling end) is likely to be more

COUNTRY-PAIR FDI POSITIONS

inability to detect which can be valuable ment

barriers to undertaking greenfield FDI

Journalof International Business Studies

_Impact of ISO 9000

A Clougherty and Michat Grajek__^ Joseph

generate process ineffective communication,

firm the acquiring take control: thus less

Journalof International Business Studies

*"_Impact of ISO 9000

A Clougherty and Michat Joseph Grajek_

selling end is likely to be replicated for FDI;

effect of ISO 9000 diffusion on the

FDI within generate enhanced nomic relationships.

9000 certification (the selling end) is likely to

FDI, where between discriminate certified home-nation

FDI within generate enhanced nomic relationships.

9000 certification (the buying end) is likely to

Journalof International Business Studies

_Impact of ISO 9000

A Clougherty and MichaJGrajek_"_}j_ Joseph

Proposition 3: The impact of ISO 9000 diffusion

economic country-pair relationships OECD and non-OECD members.

Journalof International Business Studies

^_Impact of ISO 9000

A Clougherty and Michal Joseph Grajek_

of political constraints inhost countrybased on veto points (higher