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A triple analysis of ISO 9000 effects on company performance

Article in International Journal of Productivity and Performance Management · June 2007

DOI: 10.1108/17410400710757150

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Micaela Martínez-Costa Angel R. Martínez-Lorente

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IJPPM
56,5/6
484
Received September 2006
Revised (1) March 2007
Revised (2) March 2007
Accepted March 2007
International Journal of Productivity
and Performance Management
Vol. 56 No. 5/6, 2007
pp. 484-499
q Emerald Group Publishing Limited
1741-0401
DOI 10.1108/17410400710757150
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1741-0401.htm
A triple analysis of ISO 9000
effects on company performance
Micaela Martı́nez-Costa
University of Murcia, Murcia, Spain, and
Ángel R. Martı́nez-Lorente
Polytechnic University of Cartagena, Cartagena, Spain
Abstract
Purpose – ISO 9000 certification has a growing importance for companies, mainly in Europe but also
in other countries. Several papers have analysed the effects of ISO 9000 certification on company
results, with contradictory conclusions. The purpose of this work is to clarify these possible effects.
Design/methodology/approach – This paper reports new findings on the topic following a study
using data from 713 companies and using the two methodologies that have been applied in the
scientific literature: the comparison of certified and non-certified companies and a longitudinal study
of the results of certification.
Findings – The data suggest that not only is ISO 9000 positive for companies but also it can actually
reduce benefits and profitability.
Practical implications – Several reasons for these results can be suggested and constitute a
critique of the almost compulsory character of ISO 9000 as a norm for performance in some markets.
Companies should be aware that implementing ISO 9000 just for compliance does not constitute a
competitive advantage.
Originality/value – This research uses objective measures of performance and combines two
methodologies: the comparison between certified and non-certified companies and a longitudinal
analysis.
Keywords Quality management, ISO 9000 series, Performance management
Paper type Research paper
I. Introduction
From the creation of the quality standard ISO 9000 to the present day, a large number
of companies have introduced some basic measures of quality management, trying to
accomplish the requirements of the standard. As a result, according to the International
Organization for Standardization (ISO) at the end of 2004 there were 670,399 certified
companies in 154 countries of the world (www.iso.org). This means that the number of
certified companies is growing at a rate far higher than the general level of economic
growth. China is the country with the highest number of issued certificates and Spain
is fifth in this ranking. It is also interesting to note that the ISO 9000 wave has not been
followed by companies in the USA as it has been by European companies. According
to Figures 1 and 2, American companies are not as interested in ISO 9000 as European
companies. On the basis of the size of the economies and the number of companies, one
would expect the number of certificates in USA and Europe to be similar, but, in fact,
The authors would like to thank Fundación Séneca and Fundación Cajamurcia for their financial
support
 A triple analysis
of ISO 9000

485

Figure 1.
ISO 9001 certificates

Figure 2.
ISO 9000 top ten countries

the number of certificates in the USA is less than the number of certificates issued only
in Spain. If the number of certificates were in line with GDP, Japan should also have
more certificates than China, Italy and the UK. On the other hand, the USA and Japan
are the father and the mother of TQM, the most accepted way of managing quality
according to literature (Martı́nez-Lorente et al., 1998).
Maybe the scepticism on the utility of ISO 9000, shown by some scholars (Reimann
and Hertz, 1994; Juran, 1999), is greater in the USA and Japan. In fact, many of the
certified companies state that they have implemented ISO 9000 due to external
pressures, mainly from important customers (Martı́nez-Costa and Martı́nez-Lorente,
IJPPM 2004). Moreover, Anderson et al. (1999) found that American firms are more likely to
56,5/6 seek ISO 9000 certification when they have high levels of exports to Europe.
China is a curious case, since the growth in the number of certified companies there
has been spectacular, possibly due to the fact that, apart from its spectacular economic
growth, its production is export-orientated and its companies need the certificate to
introduce their products into European markets.
486 Of course, the phenomenon of growing use of ISO 9000 has had its consequences in
the academic arena. At the time of writing the present paper, the ABI/INFORM
database contains 2,316 references that include ISO 9000 in their title or abstract.
Emerald has 1,428 and Ebsco has 287, among others. Most of these papers were
intended to analyse the effect of this standard on company performance in some way.
Many of them complied with that objective through qualitative research (case studies
mostly), but there is also an important number that used quantitative research.
However, despite the quantity of these studies there is still no clear conclusion about
the impact of ISO 9000(Corbett et al., 2005).
The present research has the aim of analysing the impact of ISO 9000 on company
performance. However, this paper is not merely another paper on ISO 9000 that
analyzes this possible effect, for the following reasons.
First, the present study uses objective measures of performance. Most of the
quantitative research on this topic relies in self-reported information through surveys.
Although these studies are perfectly accepted in the academic research, the testing of a
hypothesis using real data is always useful. Very few studies have explored the impact
of ISO 9000 on objective measures of financial performance (Sharma, 2005).
Second, two methodologies are used to analyse the problem: the comparison
between certified and non-certified firms and a longitudinal analysis to test for possible
increases in results. After a review of the literature there were found to be two main,
different ways of analysing the impact of ISO 9000, ways that were found in different
studies and never combined in a single study. These two perspectives are unified in the
present work, using the same sample. This produces two different analyses. First, the
hypothesis will be tested that companies that implemented the standard obtained
better financial results in the years following its implementation. This analysis is also
important because there are very few such longitudinal studies. Second, the
performance of companies that implemented the standard will be compared with
companies that decided not to implement the standard; the latter form a control group
for the earlier analysis.
Finally, in a third analysis, the hypothesis, put forward by a number of authors in
the literature, will be tested, that improved results after certification were not due to the
standard but to previous superior performance that allowed the companies to
implement the registration (Heras et al., 2002).
After this introduction, the paper continues with a literature review of the effect of
the standard on companies’ performance. Then the methodology used for developing
the research is explained. Results and discussion are the following sections, and the
paper ends with the exposition of the main conclusions.

II. Literature review

Although there are many papers on the influence of ISO 9000 on company
performance, there are relatively few that study that influence using quantitative data.
Most of the studies are merely descriptive or prescriptive (Ebrahimpour et al., 1997; A triple analysis
Dick, 2000; Withers and Ebrahimpour, 2000). of ISO 9000
Some papers have used case study methodology to analyse the ISO 9000 –
company results relationship (Withers and Ebrahimpour, 2001).
In the last few years, though, there have appeared many papers that have studied
this relationship in a statistically rigorous way. After reviewing these papers, it was
found that the previously mentioned relationship has been treated in different ways 487
that will be presented now.
Some of these papers have used the event study methodology to detect positive
effects of ISO 9000 certification on the price of company shares. Docking and Dowen
(1999), Beirao and Sarsfield (2002) and Nicolau and Sellers (2002) found a positive effect
in the stock markets of the USA, Portugal and Spain. However, Martı́nez-Costa and
Martı́nez-Lorente (2003) did not find positive effects in the Spanish stock market and
Aarts and Vos (2001) found a negative relationship in the New Zealand market.
There are other papers that have analysed whether companies that implemented the
ISO standard have improved their performance. Improved performance should result
from better management or even from the use of the registration as a marketing tool
that allowed companies to increase sales.
Most of the research in this field is composed of comparative analysis between
companies that obtained the certification and companies that did not. Very probably,
this is due to the difficulty in collecting longitudinal data in this arena. Some authors
have analysed the effect on internal results. Sun (2000) found better warranty costs,
quality costs, defect rates and customer satisfaction of certified firms in a sample of 316
Norwegian companies. Others authors have also analysed the effect on financial
results. Terziovski et al. (1997) evaluate operational performance (guarantee costs,
delivery time, quality costs, rate of defects, productivity), customer satisfaction,
employee satisfaction and business performance (cash flow, innovation, number of
employees, market share, sales, exports). The paper concluded that the only variable
affected by the registration was cash flow. Singels et al. (2001) found worse ROA,
productivity, cash flow, market share, sales growth and market growth of certified
companies.
However, Heras et al. (2002) presented some results that would undermine these
previous studies, since they found that certified companies had better results not only
after certification but also prior to the certification date, which could indicate that
companies only undertake the certification process when they have enough resources
and are not overwhelmed by negative results.
The work of Romano (2000) presents a longitudinal analysis. It compares the
growth in different measures of performance six months before and after certification.
The sample is comprised of 100 Italian companies and the performance measures were
internal and external quality, quality costs and timing (cycle, manufacturing,
punctuality in delivery etc.). The conclusions are that registered companies improve
their internal quality and the reliability of the production process. A reduction in the
internal quality costs and an increase in the inspection costs are also noticeable.
Although Romano’s conclusions are interesting and explain the reasons for the
possible improvements, they do have some limitations. The most important one is the
period of time considered for the study. Companies that decide to implement the ISO
9000 necessarily need a period of time to adapt their operations to the requirements of
IJPPM the standard. six months is a short period of time for that task. In fact, by considering
56,5/6 only the six months before and after certification, Romano focuses entirely on the
period in which the company will be starting to put the standard into operation, which
implies a comparison of a period of time in which the company is starting to implement
the standard with a period of time in which the company will be officially certified. The
second problem is derived from the self-reported source of data. This could introduce a
488 bias in the study since managers could be reluctant to recognise that their effort to get
the certificate had not got good results (Sharma, 2005)
Two recent papers using longitudinal analysis and financial data are Corbett et al.
(2005) and Sharma (2005). They have found positive results of ISO 9000
implementation. Corbett et al. (2005) have found that a firms’ decision to seek their
first ISO 9000 certification is indeed followed by significant abnormal improvements in
financial performance. They compared certified firms and not-certified firms before
and after certification and they measured financial performance using different
measures: ROA, ROS, cost of goods sold divided by sales, sales growth and asset
turnover. Sharma (2005) also compared both kinds of firms before and after
certification and used profit margin, sales growth and earnings per share as measures
of financial performance.
The analysis of the literature shows that the effect of ISO 9000 on company results
is not clear. Using different methodologies, some researchers have found positive
results but others have found negative ones. Although the balance appear to be more
inclined towards the positive effect hypothesis, the evidence is not decisive and it is
necessary to add more research evidence to the topic. Consequently, the present study
does not advance strict hypotheses, but poses the following research questions:
R1. Do ISO-certified companies get better results after certification?
R2. Do ISO-certified companies outperform non certified companies?
R3. If certified companies outperform non-certified ones, could this be due to the
fact that the former outperformed the latter before certification?

III. Methodology
Data gathering
Data needed for the testing of the hypotheses in this research was of two types: date of
certification and financial performance data for each company.
Information regarding registration was collected through a postal survey sent to
Spanish manufacturing companies with more than 100 employees included in a
Spanish financial database called SABI. The advantage of this database is that it offers
objective financial data as well as general information that could later be used. The
total population consisted of 2,986 companies. The reason for selecting manufacturing
companies was that ISO 9000 was originally intended for manufacturing companies.
The new version in 2000 adapted terminology for service companies. Also, ISO 9000
acknowledges that service companies show different characteristics than
manufacturing companies (Beaumont et al., 1997; Brah et al., 2000; McAdam and
Canning, 2001; Gustafsson et al., 2003). Furthermore, focusing on manufacturing
companies would help to control for any confounding factors that might enter into the
analyses as a result of using both manufacturing and service companies.
 Questionnaires were sent, addressed “for the attention of the ‘quality manager’”. A triple analysis
Inside each envelope were a presentation letter, a questionnaire and a pre-paid, of ISO 9000
addressed envelope to be used when returning the completed questionnaire. In the
covering letter, quality managers were promised a summary of the survey results.
The first wave of the survey was sent to 2,986 companies in March 2003. In May
2003, as advised by Frohlich (2002), a second wave was carried out to 1,500 randomly
selected companies that had not responded the first time. 489
From the original 2,986 letters sent, 36 were returned due to unknown address. Most
likely, these companies either changed their address or were no longer in existence. 12
companies listed as manufacturing turned out to be service companies. In the end, the
population was made up of 2,938 companies.
The number of completed questionnaires was 713. This constituted a response rate
of 24 per cent. Response rate is usually interpreted as being affected by the manager’s
interest in the research. In this sense, a 24 per cent response rate is considered a success
with Spanish companies and is higher than the suggested minimum in the study done
by Malhotra and Grover (1998).
Once the information regarding the certification (basically if the company was
registered and the year of the first certification) had been received, financial
information was selected from the SABI database. The work of mixing results from
both databases, considering also different years of certification and different starting
and final years of financial data in the Sabi database represented one of the difficulties
in this research.
Previously to the analysis, authors controlled the sample for size bias. A T-test was
done between certified and non-certified companies regarding number of employees.
Significant differences were not found (sig. 0.244).

Variables
As has been explained previously in the paper, one of the strengths of this research is
that it uses objective financial data to evaluate the possible impact of the ISO 9000
standard on company performance. Other strength is that different performance
measures will be analysed in order to inquire into the reasons for this possible general
improvement. The variables analysed will be:
.
Sales growth rate: to evaluate the ISO 9000 impact in sales.
.
Personnel expenses and operational cost growth rates: to evaluate the ISO 9000
impact on costs.
.
Earnings before taxes: to evaluate the ISO 9000 impact on benefits.
.
Return on assets (ROA): to evaluate the ISO 9000 impact on profitability.

Analysis
Three different analyses will be employed in order to test the research questions posed
in the first part of the paper. The first and second questions about the impact of ISO
9000 in performance will be tested by Analysis I and II. Analysis III will test the
question of the possibility that companies undertake the certification process when
they have better financial performance. These three analyses will be explained in the
following sections.
IJPPM Analysis I. The first analysis tests the research question on the influence of ISO 9000
56,5/6 on the performance variables described below. The main purpose is to test the
longitudinal improvements in certified companies after the date of registration.
Since companies usually take a considerable period of time to implement the
standard, three years-period before the year of certification was selected as the
reference of company performance without the standard. The same period of three
490 years was also selected for measuring performance after certification, since quality
initiatives do not usually give immediate results. This period of time is long enough to
evaluate the results of having implemented the certification. The period considered
varies in different studies. Corbett et al. (2002) refer to ten years, Wayhan et al. (2002)
refer to eight years, Heras et al. (2002) refer to five years, Corbett et al. (2005) refer to six
years. Our study tries to balance two aims: one, having enough years to consider that
ISO 9001 results have been reflected in company results and two, avoiding excessive
missing data.
It is important to note that only those companies that had data in the database for
all the performance measures during those six years were included in the analysis. As
a consequence, the number of companies included was dramatically reduced. However,
data is much more reliable using this method of selection. One result of this strict
criterion for inclusion is that the number of companies included is not the same for each
performance measure.
The procedure was to compare, for each variable, the three years average before
certification and the three years after. The student’s t test was used for this purpose,
taking into account that this test is used where samples are related.
However, the explained procedure could be biased by a possible abnormally high
variation in some of the variables considered for a limited number of companies. This
fact could possibly lead to a conclusion that there were differences in performance,
even though there was not a clear difference in the number of companies that improve
or get worse results. In order to avoid this problem, a non-parametric test has been
applied: the sign test, by which the number of companies that improve after
certification is compared with the number of companies that do not. The sign test relies
in the assumption that the number of positive deviations is the same as the number of
negative deviations. It is logical that, if ISO 9000 has no effect in performance, then the
number of companies that will improve will be the same as the number of companies
that do no:.

þ  pffiffiffiffi
N N
2 0:5
N 0:5 ,N ð0:1Þ
where
Nþ ¼ Number of positive results
N¼ Sample
Analysis II. The second analysis is intended to test the second research question on the
possible better performance of ISO 9000 companies over non ISO ones. In order to do
this, the methodology that is used most frequently in the literature has been used. The
average performance of certified companies during the three years after certification
has been compared with the average performance of a control group of companies that
had not been certified either in the same year or any of the three following years. The A triple analysis
certification year was excluded. of ISO 9000
This analysis is also quite restrictive. Many companies were excluded from the
analysis for not having all the data for the selected period. Some variables were also
excluded in some years because there were not enough companies in the population to
ensure statistical normality.
Again, the Student t test has been used (samples not related). Unlike the case in 491
Analysis I, the variable of performance that was not expressed in relative terms
(benefit before taxes) had to be divided by the number of employees to create a variable
that could be compared between different companies.
Analysis III. The third analysis tested the third research question posed in this
paper. It was based in a previous work that concluded that companies that had
obtained higher results after certification had better results before having implemented
ISO 9000. This phenomenon was explained by the fact that these better results
favoured the costly investment – in money and time – that the ISO implementation
needs.
In order to resolve this question, the same control group used in the second analysis
was used in this analysis. In this way, the results of this analysis will make clear
whether there is bias in the previous results. The three-year average performance of
certified companies before certification was compared to the same three-year average
performance of companies that did not get the certification either in the year in
question or in any of the following three years. The certification year is excluded from
the analysis. Again, a large number of companies were excluded due to the restriction
of having data for each variable in each year.

IV. Results
Analysis I
Table I shows a summary of the results of the longitudinal average comparison.
As can be seen, the results show at a 1 per cent level of significance that companies
that implemented ISO 9000 obtained considerably less earnings and ROA during the
three years following registration. They also had a noticeable increase in operational
costs for the same period (5 per cent significance level). Sales and personnel expenses
remained unchanged. Therefore, the effect of ISO 9001 would be an increase in
operational costs that is not compensated with and increase in sales turnover and,
consequently, profitability decreases.
Table II presents the number of companies that improved or worsened after the ISO
9000 implementation.
With this test, the results of the previous analysis (Table I) are mostly confirmed.
The number of companies that had worse earnings and ROA after ISO implementation

Variables N Average after ISO Average before ISO T P

Earnings before taxes 179 3,206,022 7,282,584 4.373 0.000

ROA 180 3.5688 6.3663 4.728 0.000
Sales growth rate 126 19.6342 15.4072 21.235 0.219
Operational costs growth rate 126 23.7107 15.5076 22.081 0.040 Table I.
Personnel expenses growth rate 129 13.5460 13.9341 0.147 0.884 T-test. Analysis I
IJPPM was higher, at the 1 per cent level of significance, than the number of companies that
56,5/6 improved. However, the test does not confirm the same in relation to the variable of
operational costs. This fact would show that, in general, ISO 9001 is not positive for
companies. However, some companies get benefits from ISO 9001, what means that it
can be positive according to specific circumstances.

492
Analysis II
This analysis consisted of a comparison between certified and non-certified companies
for all the performance variables during three years after registration. From the raw
data only those companies that had information for all the years and all the variables
were selected. The results are presented in groups by the year of certification. The last
year is 1998, since the database had very little data later than 2001 (see Table III).
According to these results, in 1995 there were no significant differences between the
groups. In 1996 and 1997 certified companies obtained less return on assets than
non-certified. The last year analysed, 1998, indicates that certified companies had
lower earnings and more operational costs.

Analysis III
This final test was intended to respond to the research question on the possibility that
results after certifications were conditioned by the previous results of companies before
the implementation of ISO 9000.
Table IV shows the results of the t-test for the comparison of certified and
non-certified performance during the three years prior to registration. It is important to
note that those companies are the same (both certified and control groups) as in
Analysis II. The number of companies differs due to the requirement of having data in
all the years considered (the years considered differs).
As it can be observed in the table, except for companies that were certified in 1998,
there is a significant difference in earnings, with companies that were certified having
better performance. ROA is also better in this group for most of the years considered
(1994, 1995 and 1996). In addition, certified companies had higher sales growth rates in
1995. However for 1998 certified companies have bigger growth rates in personnel
expenses. (Despite the use of the term “year” when referring to the group considered in
the analysis, the performance is referred to the previous three years prior to the year
mentioned).

Percentage of Percentage of
companies companies
Variables N that improve that worsen Sign-test P

Earnings before taxes 179 21.23 78.77 27.698 0.000

ROA 180 38.33 61.67 23.130 0.000
Sales growth rate 126 51.59 48.41 0.356 0.639
Table II. Operational costs growth rate 126 47.62 52.38 20.534 0.296
Sign-test. Analysis I Personnel expenses growth rate 129 47.29 52.71 20.616 0.269
 Certified companies Non-certified companies
Variables average N average N t p

Year of certification 1995

Earnings before taxes/employees average 7.7184 30 8.8659 285 0.380 0.704
ROA 3.8648 32 4.8357 285 0.657 0.515
Sales growth rate NA NA NA NA NA NA
Operational costs growth rate NA NA NA NA NA NA
Personnel expenses growth rate NA NA NA NA NA NA
Year of certification 1996
Earnings before taxes/employees average 5.8773 45 10.1955 257 1.610 0.109
ROA 1.4384 45 5.0179 258 2.255 0.029
Sales growth rate 16.7055 38 17.0438 245 0.089 0.929
Operational costs growth rate 26.9978 38 20.4533 244 21.00 0.315
Personnel expenses growth rate 8.7041 39 16.2136 245 1.572 0.117
Year of certification 1997
Earnings before taxes/employees average 7.1454 33 12.2756 218 1.438 0.152
ROA 1.9514 30 4.9327 227 2.350 0.020
Sales growth rate 18.6633 24 17.4439 213 20.20 0.842
Operational costs growth rate 21.8299 24 19.8373 212 20.32 0.750
Personnel expenses growth rate 12.8575 25 17.1423 211 0.571 0.568
Year of certification 1998
Earnings before taxes/employees average 6.7084 31 14.4853 117 2.809 0.006
ROA 4.4509 32 4.5517 118 0.081 0.936
Sales growth rate 27.6086 30 13.8220 112 21.67 0.104
Operational costs growth rate 27.9348 30 15.1066 112 22.26 0.025
Personnel expenses growth rate 18.8011 30 16.1580 111 20.35 0.728
A triple analysis
of ISO 9000

493

T-test. Analysis II
Table III.
 494
56,5/6
IJPPM

Table IV.
T-test. Analysis III
Variables Certified companies average N Non-certified companies average N t p

Year of certification 1994

Earnings before taxes/employees average 15.9800 27 1.04833 52 23.83 0.001
ROA 5.2867 28 2.0244 51 22.51 0.014
Sales growth rate NA NA NA NA NA NA
Operational costs growth rate NA NA NA NA NA NA
Personnel expenses growth rate NA NA NA NA NA NA
Year of certification 1995
Earnings before taxes/employees average 16.3822 40 1.1605 180 20.65 0.000
ROA 7.2315 41 1.6511 180 24.36 0.000
Sales growth rate 22.6079 39 8.0062 49 22.57 0.012
Operational costs growth rate 25.9333 39 16.7628 48 21.11 0.269
Personnel expenses growth rate 29.1070 41 14.5862 49 21.33 0.186
Year of certification 1996
Earnings before taxes/employees average 15.6098 53 2.4052 209 24.06 0.000
ROA 6.3574 53 2.3859 209 23.24 0.001
Sales growth rate 16.4971 49 17.6127 158 0.202 0.840
Operational costs growth rate 20.3618 49 16.4697 154 21.27 0.205
Personnel expenses growth rate 13.9743 50 9.0224 159 22.05 0.041
Year of certification 1997
Earnings before taxes/employees average 18.0722 41 4.9592 190 22.15 0.037
ROA 5.4483 42 3.7955 190 21.21 0.228
Sales growth rate 23.3902 41 18.1459 172 20.92 0.358
Operational costs growth rate 19.0427 40 20.9421 170 0.361 0.718
Personnel expenses growth rate 18.4229 41 9.7325 173 21.08 0.286
Year of certification 1998
Earnings before taxes/employees average 8.5786 36 8.1377 106 20.16 0.874
ROA 3.9070 37 4.3614 106 0.336 0.737
Sales growth rate 13.5536 34 12.9821 98 20.19 0.849
Operational costs growth rate 14.8988 35 15.0621 98 0.042 0.966
Personnel expenses growth rate 14.9108 34 8.3087 99 22.41 0.017
V. Discussion A triple analysis
The present paper had the objective of providing a perspective on the situation of the of ISO 9000
research regarding the effect of ISO 9000 on performance, and to add a new vision and
support by applying the different methodologies employed in the literature to a single
sample. The research questions were based on the papers that studied this topic
previously.
The first research question asks if the ISO 9000 certification has an influence on 495
company performance. This was tested with Analyses I and II.
In first place, a longitudinal study that consisted in a t-test comparing performance
before and after certification is presented (see Table I). Excluding the year of
certification, the performance average of the three years before the implementation of
ISO 9000 is compared to the performance average during the three years following
registration. The analysis shows not only that certified companies have not improved
their results, but also that their results have worsened.
However, this analysis could be biased by an abnormal performance of some
companies in one of the groups. In order to avoid that problem, a second analysis was
performed: the sign-test. The sign test compares the number of companies that
improve with the number of companies that worsen. The results support the
conclusion that certified companies obtained less earnings and ROA after certification.
There were no differences in sales, so the results do not support the conclusions of
other studies that ISO 9000 is a good marketing tool (Ebrahimpour et al., 1997; Brown
et al., 1998; Anderson et al., 1999; Hughes et al., 2000). Operational costs and personnel
expenses remained unchanged.
Analysis II compares certified and non-certified companies. Some differences have
been detected but, contrary to findings in some of the literature exposed before, these
differences are negative, as certified companies are the group with the worse
performance.
In summary, the data suggest that certification has a negative effect on company
results, mainly on earnings and ROA. These results support the findings of Singels
et al. (2001), who found that certified companies had worse average cost savings, rate of
sales growth, rate of market share growth and rate of net benefit growth when
compared with non-certified companies. However this is in contrast with the results of
many other papers that claimed that ISO 9000 has a positive effect or even no effect at
all on company performance (Simmons and White, 1999; Abraham et al., 2000; Gupta,
2000; Heras Saizarbitoria et al., 2000; Hua et al., 2000; Sun, 2000).
A number of explanations of the present findings can be advanced:
.
The cost of implementation and maintenance of the standard is greater than the
benefits that it produces.
.
This cost is high due to the fact that the standard slows the production process
by introducing too much bureaucracy in the company (Martı́nez-Costa and
Martı́nez-Lorente, 2004). The 2000 version of the standard has reduced the need
for paperwork and this could change the effect that the standard has today on
company results.
.
The benefits of implementation are low in companies that get the certificate only
in response to external pressures, since they do not apply the standard thinking
of a quality management system more in line with TQM but only with a view to
IJPPM getting the certificate at a minimum cost. Terziovski et al. (2003) found that there
56,5/6 is a positive relationship between the managers’ motives for adopting ISO 9000
certification and business performance. In this sense, the 2000 version of the
standard has tried to be more congruent with TQM prescriptions and therefore it
will be interesting to analyse the effect of this new version.
.
Some of these companies that have applied the standard only for commercial
496 reasons could be applying it only in a formal way and trying to deceive the
auditors.
.
Some companies have applied the standard because their industrial customers
have forced them to do it. Therefore, after getting the certificate they have the
costs but the same clients. If these companies have no way to decrease costs by
the application of the standard, it has been a requisite to survive but not a way of
improving.
.
Not all auditing companies have the same ways of understanding the standard
(Andrews et al., 2001), and some of them could have flexible procedures of
auditing. This will mean that two companies in the same sector certified by
different companies could be applying the standard in very different ways, and
possibly even companies certified by the same auditing company.

The last analysis in the paper was intended to test if results after the certification were
conditioned by the certified companies’ previous results.
The performed analysis showed that, prior to certification, certified companies had
better performance for some of the variables in some years. This was not confirmed for
all the variables and years, but was enough to suspect that this group was in a better
financial position to undertake the investment that ISO 9000 requires. This argument
supports the work of Heras et al. (2002): certified companies did have a better financial
performance (limited to the variables considered) before the certification. However,
Heras et al.’ (2002) findings do not agree with the previous results in Analysis I and II.
When the group of certified companies was compared with the non-certified, the former
appear to have worse results. This seems contradictory. The last analysis indicates
that certified companies started from a better position, but, as supported by the first
analysis, they deteriorated and got to a worse position than the non-certified group.

VI. Conclusions
The conclusions of this study are, necessarily, controversial. If the success of ISO 9000
is measured by the number of companies that have decided to obtain the certificate,
this success would be clear. However, the data suggest that certification is not positive
for companies and may even be negative. ISO 9000 supporters could argue that
companies increase in quality but the market benefits do not compensate for the costs
of implementing the standard and maintaining it. However, the literature on quality
shows clear benefits of quality improvement following the seminal works of PIMS
(Buzzell et al., 1975). Therefore, the present results imply two main conclusions for
companies and other organizations (such as governments):
(1) Organizations should not undertake the certification process if they do not have
customers that force them to do so. The costs of implementation and
maintenance appear to be greater than the possible benefits. However, some
 companies of the sample got better results after the certification, what could A triple analysis
imply that depending of the way of application or depending of the specific of ISO 9000
company circumstances, the norm can be positive. Therefore, the differences
amongst different industries and amongst other company characteristics in
relation to the benefits of ISO application could be interesting to analyse.
(2) Organizations should not choose their suppliers using their possession of an
ISO 9000 certificate as a requisite, since they could be creating problems for 497
their suppliers that, soon or later, will result in increased costs to themselves.

These results have never been obtained before, probably due to the fact that there are
no studies that have combined all the analyses used here in the same research and with
the same sample. The study is also limited to a group of Spanish companies that may
be different from companies in other parts of the world. However, Spain is a developed
country inside the EU and the sample is comprised of relatively big companies (more
than 100 employees), which possibly are similar to companies both inside Europe and
outside.
Of course, any quality tool can be of interest to companies that have no previous
experience in quality management. ISO 9000, and more concretely, the new version of
the standard, which addresses some of the important limitations of the previous
version, could be of help to companies without a quality system. However, there is no
evidence that it really works. Results are contradictory and further research regarding
this topic is needed.
One difficulty with research in this field is that the standard is changing and being
up-dated. A new version of the standard was approved at year 2000. Anyway, since
financial data of companies are only available with some years of delay and since
companies had until 2003 to adapt to the new standard, the analysis of the ISO
9001:2000 effect on financial company performance is still difficult.

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About the authors

Micaela Martı́nez-Costa is assistant professor at the University of Murcia (Spain). She has
previously worked at the Polytechnic University of Cartagena where she got her PhD and was
visiting professor at the University of Manchester and Arizona State University. She teaches in
management and operations. Her research focuses mainly on the study of TQM and ISO 9000
and their effect on performance. Previous articles have been published in TQM, IJQRM and QMJ.
She is the corresponding author and can be contacted at: mili@um.es
Ángel R. Martı́nez Lorente got his PhD for Murcia University in 1996 and is associate
professor at Polytechnic University of Cartagena. He teaches in operations management and
quality management. He has been visitant researcher at University of Manchester. His papers
have been published in journals as International Journal of Production Research, International
Journal of Operations & Production Management and International Journal of Production
Economics. He is member of the Editorial Advisory Board of International Journal of Quality &
Reliability Management.

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