Firm Level Determinants of International Certification in sub-Saharan Africa AFEA session at ASSA January 4, 2016

Extended Abstract This paper investigates a wide range of plausible determinants of international certification (IC) such as ISO 9001 and ISO 14001 in some sub-Saharan African countries (SSA). IC in SSA is largely seen as being driven by pressure from international markets and trade relations with Western countries. That is, businesses trading with richer countries would have a need and/or ability to adopt IC. As a result, as Kaplinksky (2010) argues the importance of standards would diminish as exports to China grow at the expense of exports to the EU. In sharp contrast to Kaplinksky (2010) the percentage of certifying firms in SSA increased from 13% in 2006 to 17.4% in 2011, while SSA’s export share to China doubled during the same period. The contribution of this study is to examine the relative significance of pressure from international markets vis-à-vis other factors in the adoption of IC in SSA. The other factors we consider are pressure from international banks and foreign investors, pressure from local officials and local community. We also control for plant specific capabilities which create opportunities for certification. We base our arguments on a combination of the Stakeholder Theory, New Institutional Theory and Resource-Based View of the Firm. Plant-level data obtained from Enterprise Surveys of the World Bank 2009 is used to test our hypothesis. Our result suggests that international markets are not the only determinants for certification in SSA. Besides export orientation, our evidence suggests that businesses may certify as a response to pressure coming from international banks. International banks may exert a coercive as well as mimetic pressure on African businesses, even when coercive pressure from international markets is missing. International banks, most of which are committed to socially and environmentally sustainable practices, may facilitate the diffusion of standards in the host country. International banks may also perform sustainability-related risk analysis urging customers to demonstrate corporate social responsibility. Our result suggests that pressure from local sources such as officials and community is relatively weak to push businesses towards certification. The contribution of this paper is to provide a comprehensive study on the plant-level determinants of certification in SSA. We adopt a much needed but yet missing micro-level and multilevel approach in addressing our research objectives. Furthermore, unlike previous studies we theoretical ground and empirically test the role of pressure from international banks as a possible factor in driving plants towards standardization.