1. Home
  2. Volume 7 - Number 1
  3. Quality standards, crime management and the efficiency of manufacturing firms in middle-income economies
New submission
Issues
Journal Information
Aims and ScopeEditorial BoardEditorial Advisory BoardJournal Policies
Resources
For Readers
For Authors
For Editors
For Reviewers
Publication EthicsCall for Special Issue
ISSN
ISSN 2615-9821
ISSN(Previous) 2588-1396

Volume 7 - Number 1 | March 2023

Quality standards, crime management and the efficiency of manufacturing firms in middle-income economies

Nicholas Addai Boamah, Francis Ofori-Yeboah, and Nicholas Asare

28/03/2023 36 0 0
Like Buy now 20.000 đ
Efficiency Middle income economies Bribery Theft and vandalism Firm ownership Quality assurance.

Abstract:

Purpose
This study investigates the ability of crime management expenses, recognised external quality certification and ownership structure to describe the cross-sectional changes in the capital and labour efficiencies of manufacturing firms in middle income economies. It controls for the potential effects of graft incidence and firm age on firm-level efficiency.

Design/methodology/approach
The study adopts a state space model approach within the context of cross-sectional regressions. Data for the study are obtained from the World Bank Enterprise Survey for 2006, 2009, 2013, 2016 and 2019.

Findings
The study provides evidence that crime management expenses impact labour efficiency negatively. Also, its effect on capital efficiency is positive in 2019 and negative in 2013 and 2016 eras. Additionally, external auditor services and internationally recognised quality certification increase labour and capital efficiencies. Graft incidence exerts negative and positive effect on capital efficiency in the recent and earlier periods respectively. In addition, older firms tend to have higher labour efficiency, whilst younger firms have higher capital efficiency. There is evidence of firm size and export orientation effects in the drivers of efficiency.

Originality/value
Policies aimed at creating graft and crime-free business environment will enhance the efficiency and growth of firms' particularly for small firms. Also, the market rewards recognised quality assurance and good reputation.

References:

  1. Aizenman, J., Jinjarak, Y., Estrada, G. and Tian, S. (2018), “Flexibility of adjustment to shocks: economic growth and volatility of middle-income countries before and after the global financial crisis of 2008”, Emerging Markets Finance and Trade, Vol. 54 No. 5, pp. 1112-1131.
  2. Albulescu, C.T., Drăghici, A., Fistiş, G.M. and Truşculescu, A. (2016), “Does ISO 9001 quality certification influence labor productivity in EU-27?”, Procedia-Social and Behavioral Sciences, Vol. 221, pp. 278-286.
  3. Ali, J. and Yusuf, N. (2021), “International quality certification and business performance of Indian firms: evidence from enterprise survey data”, Global Business Review, Vol. 22 No. 6, pp. 1459-1470.
  4. Amin, M. (2010), Crime and Security in the Eastern Europe and Central Asia Region, World Bank Group Enterprise Note, The World Bank, Washington, DC.
  5. Anselin, L. (2001), “Spatial econometrics”, A Companion to Theoretical Econometrics, 310330.
  6. Anselin, L., Bera, A.K., Florax, R. and Yoon, M.J. (1996), “Simple diagnostic tests for spatial dependence”, Regional Science and Urban Economics, Vol. 26 No. 1, pp. 77-104.
  7. Aterido, R., Hallward-Driemeier, M. and Pagés, C. (2011), “Big constraints to small firms' growth? Business environment and employment growth across firms”, Economic Development and Cultural Change, Vol. 59 No. 3, pp. 609-647.
  8. Banker, R.D., Huang, R. and Li, Y. (2014), “Do accounting standards matter for firm productivity? Evidence from mandatory IFRS adoption”, Evidence from Mandatory IFRS Adoption (22 April 2014).
  9. Bera, A.K. and Yoon, M.J. (1993), “Specification testing with locally misspecified alternatives”, Econometric Theory, Vol. 9 No. 4, pp. 649-658.
  10. Breit, E., Song, X.J., Sun, L. and Zhang, J. (2019), “CEO power and labor productivity”, Accounting Research Journal, Vol. 32 No. 2, pp. 148-165.
  11. Calza, E. and Goedhuys, M. (2021), “Just a piece of paper? Domestic standards certification and small firm growth in Viet Nam”, The Journal of Development Studies, Vol. 57 No. 8, pp. 1351-1372.
  12. Chen, M.X., Wilson, J.S. and Otsuki, T. (2008), “Standards and export decisions: firm-level evidence from developing countries”, The Journal of International Trade and Economic Development, Vol. 17 No. 4, pp. 501-523.
  13. Chen, Y., Lin, B., Lu, L. and Zhou, G. (2020), “Can internal audit functions improve firm operational efficiency? Evidence from China”, Managerial Auditing Journal, Vol. 35 No. 8, pp. 1167-1188.
  14. Cooray, A. and Dzhumashev, R. (2018), “The effect of corruption on labour market outcomes”, Economic Modelling, Vol. 74, pp. 207-218.
  15. Dickens, W.T., Katz, L.F., Lang, K. and Summers, L.H. (1989), “Employee crime and the monitoring puzzle”, Journal of Labor Economics, Vol. 7 No. 3, pp. 331-347.
  16. Durand, R. and Vargas, V. (2003), “Ownership, organisation, and private firms' efficient use of resources”, Strategic Management Journal, Vol. 24 No. 7, pp. 667-675.
  17. Faruq, H.A. and David, T.Y. (2010), “The determinants of technical efficiency of manufacturing firms in Ghana”, Global Economy Journal, Vol. 10 No. 3, Article 7.
  18. Floch, J.M. and Le Saout, R. (2018), “Spatial econometrics – common models”, in Handbook of Spatial Analysis: Theory and Practical Application with R, pp. 149-177.
  19. Galiani, S., Jaitman, L. and Weinschelbaum, F. (2020), “Crime and durable goods”, Journal of Economic Behavior and Organization, Vol. 173, pp. 146-163.
  20. Gallego, J.M. and Ramírez, L.H.G. (2021), “Quality certification and firm performance. The mediation of human capital”, International Journal of Productivity and Performance Management, Vol. ahead-of-print No. ahead-of-print.
  21. Gebreeyesus, M. (2015), “Firm adoption of international standards: evidence from the Ethiopian floriculture sector”, Agricultural Economics, Vol. 46 S1, pp. 139-155.
  22. Habibov, N.N. (2011), “Self-perceived social stratification in low-income transitional countries: examining the multi-country survey in Armenia, Azerbaijan, and Georgia”, International Journal of Social Economics, Vol. 38 No. 1, pp. 5-22.
  23. Hain, D.S. and Jurowetzki, R. (2018), “Local competence building and international venture capital in low-income countries: exploring foreign high-tech investments in Kenya's Silicon Savanna”, Journal of Small Business and Enterprise Development, Vol. 25 No. 3, pp. 447-482.
  24. Hallward-Driemeier, M., Iarossi, G. and Sokoloff, K.L. (2002), “Exports and manufacturing productivity in East Asia: a comparative analysis with firm-level data”, Working Paper No. 8894, NBER.
  25. Hammami, A. and Zadeh, M.H. (2019), “Audit quality, media coverage, environmental, social, and governance disclosure and firm investment efficiency: evidence from Canada”, International Journal of Accounting and Information Management, Vol. 28 No. 1, pp. 45-72.
  26. Herrera, S. and Kouamé, W. (2017), “Productivity in the non-oil sector in Nigeria: firm-level evidence”, Policy Research Working Paper, (8145), World Bank.
  27. Hosseinzadeh, A., Smyth, R., Valadkhani, A. and Moradi, A. (2018), “What determines the efficiency of Australian mining companies?”, Australian Journal of Agricultural and Resource Economics, Vol. 62 No. 1, pp. 121-138.
  28. Imran, S.M., Ur Rehman, H. and Khan, R.E.A. (2019), “Determinants of corruption and its impact on firm performance: global Evidence”, Pakistan Journal of Commerce and Social Sciences (PJCSS), Vol. 13 No. 4, pp. 1017-1028.
  29. Islam, A. (2014), “Economic growth and crime against small and medium sized enterprises in developing economies”, Small Business Economics, Vol. 43 No. 3, pp. 677-695.
  30. Islam, A., Palacios Lopez, A. and Amin, M. (2019), “Decomposing the labour productivity gap between migrant-owned and native-owned firms in Sub-Saharan Africa”, The Journal of Development Studies, Vol. 55 No. 9, pp. 2065-2082.
  31. Kabir, M.A. and Ahmed, A. (2019), “An empirical approach to understanding the lower-middle and upper-middle income traps”, International Journal of Development Issues, Vol. 18 No. 2, pp. 171-190.
  32. Kato, A. and Sato, T. (2014), “The effect of corruption on the manufacturing sector in India”, Economics of Governance, Vol. 15 No. 2, pp. 155-178.
  33. Kinda, T. (2012), “Foreign ownership, sales to multinationals and firm efficiency: the case of Brazil, Morocco, Pakistan, South Africa and Vietnam”, Applied Economics Letters, Vol. 19 No. 6, pp. 551-555.
  34. Lee, S.H. and Weng, D.H. (2013), “Does bribery in the home country promote or dampen firm exports?”, Strategic Management Journal, Vol. 34 No. 12, pp. 1472-1487.
  35. LeSage, J. and Pace, R.K. (2009), Introduction to Spatial Econometrics, Chapman and Hall/CRC, Random House.
  36. Lin, J.Y. (2017), “Industrial policies for avoiding the middle-income trap: a new structural economics perspective”, Journal of Chinese Economic and Business Studies, Vol. 15 No. 1, pp. 5-18.
  37. Lin, C., Ma, Y. and Su, D. (2009), “Corporate governance and firm efficiency: evidence from China's publicly listed firms”, Managerial and Decision Economics, Vol. 30 No. 3, pp. 193-209.
  38. Liu, H., Wu, S., Zhong, C. and Liu, Y. (2021), “An empirical exploration of quality management practices and firm performance from Chinese manufacturing industry”, Total Quality Management and Business Excellence, Vol. 32 No. 15-16, pp. 1694-1712.
  39. Martincus, C.V., Castresana, S. and Castagnino, T. (2010), “ISO standards: a certificate to expand exports? Firm-level evidence from Argentina”, Review of International Economics, Vol. 18 No. 5, pp. 896-912.
  40. Masakure, O., Cranfield, J. and Henson, S. (2011), “Factors affecting the incidence and intensity of standards certification evidence from exporting firms in Pakistan”, Applied Economics, Vol. 43 No. 8, pp. 901-915.
  41. McIntyre, K.H. and Martin, C.A. (2013), “Estimates and determinants of firm efficiency in eastern europe: evidence from Romanian microdata”, Eastern European Economics, Vol. 51 No. 2, pp. 58-89.
  42. Morris, D.M. (2018), “Innovation and productivity among heterogeneous firms”, Research Policy, Vol. 47 No. 10, pp. 1918-1932.
  43. Moyo, B. (2012), “Crime, security and firm performance in South Africa”, Corporate Ownership and Control, Vol. 9 No. 4, pp. 241-252.
  44. Nanka-Bruce, D. (2011), “Corporate governance mechanisms and firm efficiency”, International Journal of Business and Management, Vol. 6 No. 5, pp. 28-41.
  45. Ndiaye, N., Razak, L.A., Nagayev, R. and Ng, A. (2018), “Demystifying small and medium enterprises(SMEs) performance in emerging and developing economies”, Borsa Istanbul Review, Vol. 18 No. 4, pp. 269-281.
  46. Nhung, V. and Phuong, L. (2021), “Cost of corruption and efficiency in employment of firms: the case in Vietnam”, Accounting, Vol. 7 No. 3, pp. 609-614.
  47. Omar, M., Nawawi, A. and PutehSalin, A.S.A. (2016), “The causes, impact and prevention of employee fraud: a case study of an automotive company”, Journal of Financial Crime, Vol. 23 No. 4, pp. 1012-1027.
  48. Pekovic, S. and Rolland, S. (2016), “Quality standards and export activities: do firm size and market destination matter?”, The Journal of High Technology Management Research, Vol. 27 No. 2, pp. 110-118.
  49. Sánchez-Ollero, J.L., García-Pozo, A. and Marchante-Lara, M. (2015), “Measuring the effects of quality certification on labour productivity: an analysis of the hospitality sector”, International Journal of Contemporary Hospitality Management, Vol. 27 No. 6, pp. 1100-1116.
  50. Salas-Velasco, M. (2018), “Resource misallocation and production inefficiency: estimating cross-country differences in macroeconomic performance”, Journal of Economic Studies, Vol. 45 No. 6, pp. 1272-1287.
  51. Saridakis, G., Mohammed, A.M. and Sookram, S. (2015), “Does crime affect firm innovation? Evidence from Trinidad and Tobago”, Economics Bulletin, Vol. 35 No. 2, pp. 1205-1215.
  52. Sharma, C. and Mitra, A. (2015), “Corruption, governance and firm performance: evidence from Indian enterprises”, Journal of Policy Modeling, Vol. 37 No. 5, pp. 835-851.
  53. Singh, R.K. (2017), “Does foreign ownership improve firm's productivity? An analytical view”, Indian Journal of Industrial Relations, Vol. 53 No. 2, pp. 225-238.
  54. Su, D. and He, X. (2012), “Ownership structure, corporate governance and productive efficiency in China”, Journal of Productivity Analysis, Vol. 38 No. 3, pp. 303-318.
  55. Su, D. and Yao, Y. (2017), “Manufacturing as the key engine of economic growth for middle-income economies”, Journal of the Asia Pacific Economy, Vol. 22 No. 1, pp. 47-70.
  56. Tong, S. (2019), Managerial Quality, Firm Performance, Technical Efficiency and Productivity in New Zealand, Doctoral dissertation, University of Newcastle, Australia.
  57. Trifković, N. (2017), “Spillover effects of international standards: working conditions in the Vietnamese SMEs”, World Development, Vol. 97, pp. 79-101.
  58. Ugwu, M.O. and Omeje, A.N. (2021), “Private ownership structure and firm productivity: a firm-level empirical evidence from Nigeria”, South Asian Journal of Social Studies and Economics, Vol. 11 No. 4, pp. 9-22.
  59. Ullah, B., Wei, Z. and Xie, F. (2014), “ISO certification, financial constraints, and firm performance in Latin American and Caribbean countries”, Global Finance Journal, Vol. 25 No. 3, pp. 203-228.
  60. Vandenberg, P., Poot, L.P. and Miyamoto, J. (2015), “The middle-income transition around the globe: characteristics of graduation and slowdown”, Working Paper 519, ADBI.
  61. Wang, P., Wang, X., Huang, Z. and Fan, B. (2021), “Overcoming the middle-income trap: international experiences and China's choice”, China Economic Journal, Vol. 14 No. 3, pp. 336-349.
  62. Yang, Y.J., Chen, J., Long Kweh, Q. and Chi Chen, H. (2013), “Ownership structure and efficiency in Taiwanese electronics firms”, Review of Accounting and Finance, Vol. 12 No. 4, pp. 351-368.
  63. Yang, G.L., Fukuyama, H. and Song, Y.Y. (2019), “Estimating capacity utilisation of Chinese manufacturing industries”, Socio-Economic Planning Sciences, Vol. 67, pp. 94-110.
  64. Yi, J. and Ifft, J. (2019), “Labor-use efficiency and New York dairy farm financial performance”, Agricultural Finance Review, Vol. 79 No. 5, pp. 646-665.
  65. Zheng, S. and Bloch, H. (2014), “Australia's mining productivity decline: implications for MFP measurement”, Journal of Productivity Analysis, Vol. 41 No. 2, pp. 201-212.
  66. Zhou, K.Z., Gao, G.Y. and Zhao, H. (2017), “State ownership and firm innovation in China: an integrated view of institutional and efficiency logics”, Administrative Science Quarterly, Vol. 62 No. 2, pp. 375-404.

Further reading

  1. Savović, S. and Mimović, P. (2022), “Effects of cross-border acquisitions on efficiency and productivity of acquired companies: evidence from cement industry”, International Journal of Productivity and Performance Management, Vol. 71 No. 4, pp. 1099-1125.

Related articles