Do manufacturing firms in Bangladesh acquire ISO certificates to offset the handicap of credit constraints?

Sungida Rashid ()
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Sungida Rashid: Southern Illinois University

SN Business & Economics, 2021, vol. 1, issue 1, 1-15

Abstract: Abstract Formal credit market imperfection scenarios in developing economies can very well impede firms as well as the country’s productivity and growth. Then how does a manufacturing firm sustain in an emerging economy with an under-developed financial market? This paper tries to investigate how a severely financially constrained manufacturing firm of an emerging economy can survive, prosper, and enter the global market. This paper presents evidence that small manufacturing firm uses internationally recognized standards like ISO to condense the adverse effect of the premature credit market. Standardized small firms were also found to experience a significantly less negative effect on export compared to those without standards. The analysis also pointed out that firms tend to rely on ISO standards more when facing major to severe financial obstacles, especially small enterprises. Empirically, the predicted probability of getting standardized is 0.32 times greater for a firm facing major to severe financial constraint compared to the one with no constraint. Smaller firms with ISO standards have significantly higher evidence of experiencing increased export basket during the sample period.

Keywords: Financial constraint; ISO certification; Export decision; Emerging economy; Small enterprise (search for similar items in EconPapers)
JEL-codes: F10 G20 L15 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s43546-020-00037-2

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