BUACC5931: ISO 9000 Adoption & Impact on China's Service Firms

This report investigates the adoption of ISO 9000 standards and its correlation with firm performance within China's service industry, utilizing data from the National Bureau of Statistics of China. It explores the impact of ISO 9000 certification on key performance indicators such as revenue, operational profit, return on sales (ROS), and return on assets (ROA). The analysis involves descriptive and inferential statistical methods, including t-tests and ANOVA, to test hypotheses related to the benefits of ISO 9000 adoption. The literature review provides context from previous studies, highlighting the importance of quality management systems and the potential for improved operational and financial outcomes. The findings suggest that ISO 9000 certification can positively influence firm performance, particularly in revenue and profit, while the impact on ROS and ROA may be less pronounced.

ISO 9000 Certification Achieve on Chinese
Firms

01. Executive Summary
Objective
The inspiration for this article was to develop a functional role in the ISO 9000, creating a study
of the benefits of analyzing the speculative effects. ISO 9000-presents an action plan for the
specific parts and components of industrail norms and regulations. The data in the present study
has been obtain from the statistical bureau of China. Since the previous works found in other
countries was undeniable that the firms do not understand the homogeneous characteristics of
ISO 9000, this research aims to develop a model with statistical consistency. The constructive
effects of ISO compliance were analysed in the present study for the Chinese firms.
Results
The results may be of interest to the development of the community and a responsible
professional which could be used as a guide for the success of the company in the manufacturing
sector. The results could be suitable for a qualified and demanding community where the main
features of ISO 9000 choices were crucial for administrators; some parts of critical examination
applications were presented and could be used later. Recognition of ISO as a powerful tool was
important, and the article presents the effect that the choice of ISO certification increases the
operational and profit factor, and implications of ownership of the application installations of
ISO. The scholar found significant impact of ISO adoption for profit, revenue, return on sales,
and return on assests of the companies. The scholar utilised independent t-test and ANOVA to
establish the alternate hypotheses, which assumed significant difference in output due to ISO
norms. Considerable amount of outcome was verified for employee numbers and education level
for the two categories of firms in the database.
Recommendation
The results show a profitable effect that confirms the successful development of the company.
Study of Standardization 9000 certification of the international certification body, examined by
the Chinese companies, whether the ISO organization was an important element of development.
The outcomes indicated advantages for ISO firms in all aspects, which affirmed that firms should
become ISO complaint for superior bussiness results. Employee position of the ISO firms

indicated that for adoption of the ISO compliances small non ISO firms should increase their
skilled staff strength.
Table of Contents
01.Executive Summary..................................2
02.Introduction..............................................4
03.Literature Review......................................5
04.Methodology...........................................11
05.Data Analysis..........................................12
5.1 Descriptive Analysis.............................12
5.2 Inferential Analysis...............................20
06.Discussion...............................................22
07.Limitation and Future scope....................23
08.References..............................................24
09.Appendix.................................................27

02. Introduction
A number of companies were not capable of ISO adaptation because they depend on the
institutional environment. Thus, being involved in structural remorms, and organizational
rationality with technological processes was the new law. These requirements have been
numerous over the last ten years, especially as the economic importance of the quality system
could be achieved by adopting. The system to measure the quality of the companies' existence
and the very competitive position in the installation of these systems of complete identification
was capacity. The regulatory requirements of the International Organization (Terziovski, &
Guerrero, 2014) have undergone a screening of the quality management system requirements of
the resolution, currently around 900 000 ISO standard 9000-control companies (in 2007 (Cycle
17)) were certified worldwide (Christmann, & Taylor, 2006). Thus, an object-oriented
institutional quality certification of ISO 9000 quality processes of institutional economic
literature was to gain legitimacy and effectiveness as the most important thing. However, a
limited number of studies with Chine firms have been done for ISO 9000 certification.
Interestingly, even at these levels, many companies have yet not received ISO 9000
certifications. However, the implications and output of the companies that adapt ISO 9000 were
not equally comparable in all areas. Given that customer service was inconvenient for the
management of product quality, which could improve the quality of monitoring services. the
original development policies were more favorable to manufacturers. As a result, the logic of
long experience in manufacturing companies will benefit from the experience of quality control.

03. Literature Review
However, the earlier study of ISO 9000 identity was based mainly on the manufacturing industry
and was based on a relatively small number of companies. The innovation in the paper has been
the comparitive analysis with all the aspects of the firms from different manufcaturing sectors
(Hikichi, Salgado, & Beijo, 2017). The scholar has experimented with an original Chinese
database that allowed to test ISO 9000 certification status and differentiation of the results was
apparent in categorical grade of ISO.
Quality, customer satisfaction, and competitive position were essential elements. Unfortunately,
time management was rare, limited resources and the quality of knowledge was a barrier to
maitain the quality of in a small company. As a result, supposition of small businesses reaching
world-class quality often gets hit by practicality. By contrast, large companies and certified firms
could invest in a proper way. Perrini, Russo, Tencati, & Vurro (2011) argued that large
companies will continue to improve their value compared to small firms due to level of compact
design.
The affordable cost provides competitive advantage over contenders, according to Fonseca
(2015) quality control was based on the traditional economic model (ECL). There was a balance
between the cost of prevention and assessment and the internal and external costs of failure.
From a point of view, the optimal ECL has a marginal cost, the marginal faulty cost was equal to
the value. In the said work the survey trends were reflected, which indicated that ISO compalint
firms increased gradually within the time period of 1993 to 2013 (Figure 1).

Figure 1: ISO 9001 Certified Organizations Survey Trends
Source: Fonseca, 2015
The impact of the 713 sample performance for the Spanish manufacturers on the company was
valuated. Preliminary methodological were utilized to investigate the effectiveness of structural
education, and it was concluded that ISO 9001/2000 certified companies were less effective than
certified ISO 9000/1994 or non-certified companies. However, it was found that ISO 9001/2000
certified companies use TQM systems at a higher level than ISO 9000/1994 certified companies,
but were not sure whether they work better (Martínez-Costa, Choi, Martínez, & Martínez-
Lorente, 2009).
The source data on the research of French companies was utilized to analyze the existence of the
International Organization for Standardization (ISO) 9000 certification between the
manufacturing sector and the tertiary sector. Through an empirical approach, results reflected
that ISO 9000 determinants differ significantly from production and service companies, in
particular by examining the characteristics of improving quality, cost reduction, and innovation.
However, it was also proved that the characteristics of the company and the satisfaction of their
external strategies play an important role in the ISO 9000 certification (Pekovic, 2010). In the
manufacturing sector, the estimated impact of the independent attributes on firms for ISO and
non ISO compalince has been presented in Table 1. The differnce in early and new ISO adopters
was also estimated by the siad researck by Pekovic (2010).

Table 1: Probit Sample Selection Model (Manufacturing Sector)
Source: Model of Pekovic, 2010
Note: ‘***’ denote that the corresponding values were significant at 1% level of significance.
The two equations of the model were as follows,
The empirical results also showed that the ISO 9000 certification has good performance
compared with the companies implemented by the controlled non-certified companies. The
comparison of non-certified peers related to list activities was also one of the highest
performance and Prototype technologies certified manufacturers. In addition, the
recommendation indicates that the other evidence companies have begun to receive the impact of
the certification period. In addition, the analysis of revisions 2000 and 2008 contributes to the
analysis of ISO 9000, which actually shows the static performance (Lo, Wiengarten, Humphreys,
Yeung, & Cheng, 2013). In Table 2 the estimated coefficients of hierarchical linear modeling

(HLM) by Lo et al. (2013) has been presented. The analysis was performed for four models, and
the results reflected significant impact on the firms post ISO adoption.
Table 2: HLM Analysis ROA Model
Source: Lo, Wiengarten, Humphreys, Yeung, & Cheng, 2013
In another literaure data from 149 service and 160 production departments and general
surveying organizations was collected. Experimental results showed that there was no
statistically significant difference between group the companies with respect to time and cost.
There were significant differences between the groups in terms of the benefits obtained and the
management practices associated with this specification (Singh, Feng, & Smith, 2006).
Collectively evaluation of the application of ISO 9OOO in United Arab Emirates organizations,
based on the use of business processes or equipment processes to determine the effectiveness of
the rules was done. Specifically, the purpose was to analyze the standard benefits, and
implementation factors. The quantitative study to achieve research objectives was still 51% of
the 100 certified companies in the United Arab Emirates. The preliminary conclusion

demonstrated that the organization with standard implementation has a positive impact (Magd, &
Nabulsi, 2012). The researcher also proposed the model for continous improvement of QMS
(quality management system) with value added activities and final information from the
customers.
Figure 2: Conceptual Model Process Based Quality Management System
Source: Magd, & Nabulsi, 2012
In another study results explained that the leaders of the coastal Coast of Ivory were not aware
enough of the facts and authenticity of the ISO 9000 quality control. However, it was the
continuation and received the ISO 9000 system of quality control systems recognized by
businessmen at the Ivory Coast. As for the benefits, they said that the main advantage of buyers
was the "Quality control system" of the ISO 9000. As a result of the change, the main change
was the actual control system of the ISO 9000 and certificate quality (Anoye, 2015).
A number of specific factors and sub-factors were proposed for the development of the ISO 9001
standard. Moreover, the concept of concealment was clearly obvious, as was the conclusion of
other previous Greek national literature, that the organization does not use ISO 9001 as an
isomorphic person. Representatives of academia suggested that the specific content of the road

should be categorized as appropriate for our future work (Siougle, Dimelis, & Economidou,
2018).
The analytical research of select Chinese certification company ISO monitors the level of
compliance based on customer preferences, customer and checking the flow of customers. What
was find that it affects effective self-regulatory system based on the level of certification, and
research-based business, with suppliers to obtain the certificate of quality (Chou, 2009).
Literaute results showed that companies will benefit more from businesses with low efficiency,
high competition, and. The research offered a useful test for 9000-review, depending on the
reference to the citations. including costs and specific resources, the operation was important for
administrators who could benefit from their results before the implementation of 9000 processes
(Dahlgaard, Khanji, & Kristensen, 2008).
Another researcher compared ISO 9001 and 14001 ISO development. The results showed that
the number of ISO 14001 certificate more regularly on the African continent. The number of
certificates of higher 9000 ISO to 14001 ISO, but inequality withdrew the level. This work
offered an interpreter by the director in the Council of Ministers, aimed at entrepreneurs,
professionals, and organizations (Heras‐Saizarbitoria, 2011). World-wide firms that adopted ISO
norms till 2009 has been provided in Figure 3. The trend reflected that number of ISO firms
increased considerably from 1995 to 2009. From 2001 onwards ISO 9001 trend was only
considered.
Figure 3: ISO Certification Trend
Source: Heras‐Saizarbitoria, 2011

04. Methodology
4.1 Data Collection
In addition to the ISO 9000 conjecture, the Chinese national data statistics bureau was motivated
by the concentration of non ISO complaint sectors. Information on 5717 Chinese firms was
collected from the statistical bureau. The sampling was done based on the secondary data, and no
primary information was collected. Among the firms, 5257 were non ISO complaint and rest 460
firms were found to follow the ISO 9000 compliance rules.
4.2 Design
Extensive exploratory analysis was performed on the database of the firms. Descriptive measures
were analysed for proper scrutiny of the ISO effects on firms. Comparative inferential analyses
were conducted with the help of independent t-test, ANOVA (single factor), Pearson’s
correlation, and Chi-Square test of independence.
4.3 Variables
Four continuous variables were contextual with the present study. Difference in firms’ output
was investigated for the effect of binary control variable, ISO certification. In the last stages on
inferential investigation employee status (number, educational fields) was tested for
independence based on ISO certification status.
4.4 Hypotheses
The hypotheses of this exploration implicitly tried to check the structural similarities of the
firms, which were measured in this article to present the competitive picture. The scholar
emphasized for the adoption of the ISO 9000 standard for working within the business
competitive environment. The assumed hypotheses have been presented in the following tabular
form. This document has been written in four layers to outlay the effects of ISO 9000 affiliation.
In addition, it was important to bridge the literatures related to ISO complaint organizational

structure. The ISO 9000 directory of the developed countries mainly attracts researches from the
developing nations, but the statements provided here reflected the need to investigate disputes
and they could occur in a collection of different categorical information. Therefore, the
difference in the state of adoptive and yet to be implemented, has been focused on (Cao and
Prakash, 2011).
Table 3: Null Hypotheses of the Present Literature
Hypothesis Statement
H01 Sales (Revenue) of the company is independent of ISO
certification
H02 Profit of the company is independent of ISO certification
H03 Return on sales is independent of ISO certification
H04 Return on assets is independent of ISO certification
05. Data Analysis
5.1 Exploration of Data and Descriptive Analysis
Information was collected during financial survey by the National Agency and has been
published in the database for the present research. Hence, the database was considered credible
for the study. A descriptive detail of each variable was explored and has been summarized in
Table 3 and Table 4. A supporting ethics depends on the company's turnover and the reliance on
commercial research. The comparative monitoring has shown that the average employee number
of high-level training for the ISO was higher than the non-ISO 9000 firms. The other important
areas were sales, profit, corporate investment, and foreign direct investment.

Table 4: Descriptive Values of the Variables for ISO Firm Status
Table 5: Descriptive Values of the Variables for Non ISO Firm Status
Presence of ISO certfied firms were only 8.05% in the entire sample. Distribution of revenue,
profit, ROS, and ROA were found to be rightly skewed due to the major presence of non ISO
firms in the database.

Figure 4: Distribution of the Number of firms in Chinese Database
The number of ISO complaint firms (N = 5257, P =91.94%) in China was comparatively less to
firms adopted ISO 9000 norms (N = 460, P = 8.04%). Industrial scenario reflected that firms
were still not aware about positive effect of ISO certification.
Figure 5: Revenue Distribution for All Firms in Percentage
Percentage average revenue of ISO firms was higher comparative to non ISO firms. Positive
effect of ISO on revenue of firms was apparent.

Revenue distribution for ISO and non ISO firms were studied after removing the outlier values.
The outliers were determined by the cutoff limit points evaluated from the quartiles of the
respective distribution. Distribution of revenue for both ISO and non ISO complaint firms were
found to be right skewed, which implied that most of the firms were either small or medium
scaled.
Figure 6: Revenue distribution of Non‐ISO firms
Figure 7: Revenue distribution of ISO firms

Percentage average profit was way greater compared to non ISO firms. It was possible to infer
that average profit of non ISO firms could have been due to small scale business. Hence, ISO
9000 adoption was an essential requirement for future growth of profit.
Figure 8: Profit Distribution Percentage for Companies Based on ISO Status
Profit distribution for ISO and non ISO firms were studied after removing the outlier values.
Distribution of revenue for both ISO and non ISO complaint firms were found to be right
skewed, which implied that most of the firms were either small or medium scaled.
Figure 9: Profit Distribution Percentage for Non ISO firms

Figure 10: Profit Distribution Percentage for ISO firms
Return on sales exhibited a linear trend for non ISO firms, whereas right skewness was apparent
from histogram of ROS of ISO firms.
Figure 11: Histogram of ROS of Non‐ISO Firms

Figure 12: Histogram of ROS of
ISO Firms average return on sales was lower compared to that of non ISO complaint firms.
Figure 13 represents the comparison in ROS for the firms
Figure 13: Distribution Pattern of ROS for Firms

Return on assets exhibited right skewness for ISO and non ISO firms, which was apparent from
histogram of ROA of both type of firms.
Figure 14: ROA of Non‐ISO Firms
Figure 15: ROA Distribution of ISO Firms

Comparative analysis of percentage of average ROA for certified ad non certified firms has been
provided in Figure 16. Average ROA for non ISO companies was better than ISO complaint
companies.
Figure 16: Distribution Pattern of ROA for all Firms
5.2 Inferential Analysis
Usage of statistical software SPSS was done for inferential analysis. The complete data set of
scale variable was found to be reliable for analysis. The reliability was collected by the
Cronbach’s Alpha (α= 0.74) which was reasonably high for any statistical analysis.
Independent t-test was performed to compare the means of the variables for non ISO and ISO
complaint firms. For the first hypothesis on revenue, ISO adoption was found to be a significant
(t = -7.45, p < 0.05) impact factor. ANOVA for the ISO certification also established the
alternate hypothesis (F = 152.12, p < 0.05). For the hypothesis H02 profit was found to
significantly dependent (F = 52.87, p <0.05) on ISO adoption. The difference in profit for ISO
and non ISO firms was significantly different (t = -5.71, p <0.05). Return on sales (ROS) (t =
6.72, p < 0.05; F = 45.56, p < 0.05) and return on assets (ROA) (t = 7.37, p < 0.05; F = 37.24, p
< 0.05) were found to significantly dependent on ISO adoption. All the null hypotheses were

rejected and significant effect of ISO compliance was apparent from the inferential results of the
researcher (Table 6).
Table 6: Results of the Hypothesis Testing
A correlation between the four contextual variables was critically examined for their association
with each other. Revenue and profit were highly correlated, and ROS and ROA were found to be
positively and significantly correlated. These correlations were self explanatory in nature and
useful for any future analysis with regression model for revenue or profit as the dependent
variable. The following Table 7 reveals the association levels among the four variables of the
current work.
Table 7: Pair wise Correlation among the variables
Further observation was done for employee status of the firms. Pearson’s Chi-Square was used to
find difference between ISO and non ISO firms for different level of educational qualification of
employees. A significant difference was observed for qualification levels and ISO adoption

status ( χ2=7417 . 98 , p < 0 .05 ). Hence, ISO 900 complaint companies were found to be posses
diversily skilled employees (Table 8 in Appendix).
06. Discussion
As far as the quality of the organization, ISO 9000 has been the most profitable proposition so
far. ISO 9000 expands with strong knowledge examines the track the profit identification
techniques and discusses the most errant audit issues (Dahlgaard, Khanji, & Kristensen, 2008)
Usually the complexity of the guidelines of the ISO 9000 (Chou, 2009) were concerned about the
results of the expected prosperity. Current work reflects the support of many factors, including
the qualification of employee resources and qualification levels for the company. In the absence
of ISO 9000, the impact on revenue and sales were adverse. In addition, small capital companies
also got affected by not adopting ISO certificate. Profit and direct sales were related to
compliance with ISO (Christmann, & Taylor, 2006; Dahlgaard, Khanji, & Kristensen, 2008). As
a result, the overall growth of the company with the ISO 9000 certificate was noticeable. There
was a significant connection between the workers’ education with the ISO status of the firms.
The data was collected for the Chinese firms, which has the biggest worldwide market at present.
Hence, implications of ISO adoption should also encourage companies from other countries to
enroll for the certificate. A future study with regression estimated model could give a new
empirical relation in the research-based on ISO (ISO 9001, ISO 14001), that was not considered
(Hikichi, Salgado, & Beijo, 2017).

07. Limitation and Future scope
The research results of this paper have been considered in different fields and different aspects.
The analyses were conducted with the structure of the publications and research questions
available (Martínez-Costa et al., 2009). The continuation of the action in the current paper was
short of external economic factors for the companies conformed to the ISO Certification. FDI
policies require foreign direct investment over large companies. A company that uses an ISO
number was more like a company with a lot of certifications. Proper control of the need and
transparency of the appropriate tax system was required for sales and turnover. Effect of FDI was
also excluded from the current literature.
The comparative literature (Lo et al., 2013) provided the rational for ISO impact on firm size
basis. Future studies could conduct a comprehensive study of all these aspects, including the
country's tax structure. China's rapid economic growth has continued to improve, and it's
numerous and still radical institutional reforms need to be sacrificed for the faster growth rate of
the firms. After the Maoists, local government’s lack of vision about significant economic
development and decision-making gave birth to a malicious process characterized by corruption.
China reviewed the impact of the reform process from 2001, only after joining World Trade
Organization.

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09. Appendix
Table 8: Chi‐Square Results for Revenue and Profit for ISO & Non‐ISO firms
Table 9: Independent t‐test for Revenue

Table 10: Independent t‐test for Profit
Table 11: Independent t‐test for Return on Sales
Table 12: Independent t‐test for Return on Assets

Table 13: ANOVA for Revenue
Table 14: ANOVA for Profit
Table 15: ANOVA for ROS

Table 16: ANOVA for ROA