ISO 9000 Registration Earns Financial Rewards

Companies traded on the New York Stock Exchange that are ISO 9000 registered show significant improvement in their financial performance compared to firms without the registration. Analyzing the impact of ISO 9000, researchers from UCLA, the University of Maryland, and the Universidad Carlos III in Madrid, found there is a direct correlation with a firm’s return on assets.

“When we began this research in 1997, we were very skeptical and we were shocked by the magnitude of the effects,” says David Kirsch of the University of Maryland.” Not only did the 7598 studied firms with ISO 9000 registration improve their performance, but firms without ISO 9000 experienced substantial deterioration in ROA, productivity, and sales.

 

 

“Immediately after deciding to seek registration, firms experience a productivity improvement, while non-registered firms see no such improvement and eventually experience a gradual productivity decline” said the researchers. “It is clear that ISO 9000 registration did lead to relative improvements in ROA, primarily through increased productivity.”

In the industrial machinery and computer sector, the ROA of certified firms after three years increased by a relative difference of 37 percent. “Non-certified firms experienced a substantial loss of productivity and sales compared to certified firms,” according to the researchers. Non-certified firms in the electronics and electrical equipment sector suffered a drop in ROA that amounted to a relative difference of 55 percent by three years after registration. The ROA in non-certified chemical companies lagged by 12%.

 

“Given the magnitude of the performance improvements, it seems likely that other effects than ISO 9000 contributed. However, due to the use of performance matched groups and the persistent nature of the relative improvements, our findings do strongly suggest that the preparation for the ISO 9000 registration also contributed to the superior performance. The good news, clearly, is that, in all analyses we conducted, we found significant improvements in ROA. From that perspective, we can answer the question of ‘Does it pay to seek ISO 9000 registration?’ with a resounding ‘YES!’ ”

For more information on the yet to be published paper, contact the authors, David Kirsch, of the U. of Maryland atdkirsch@rhsmith.umd.edu, or Charles Corbett at UCLA at charles.corbett@anderson.ucla.edu. See an expanded article on the study at Manufacturing and Technology News <http://www.manufacturingnews.com>.