Certifying Need: Can Expanding Certification Access Help Ventures in Impoverished Communities?

Abstract

Prevailing theory assumes certifications signal quality. However, ventures that most require certifications are frequently constrained from generating such signals. Thus, extremely few can ever access certifications. Critically, this marginalizes ventures from impoverished communities. Alternatively, we surmise that certifications can improve venture performance in such communities through signaling need rather than quality. In so doing, we consider the implications of certifying the geographic place where a firm is located. We argue that place-based (as opposed to firm-based) certification is useful in detaching certification from a particular venture and, when signaling need, jolts audience members to widen their social gaze and include otherwise marginalized ventures. Our empirical context is the U.S. Historically Underutilized Business Zone program. This place-based certification flags need in specific places. Analyzing a nationwide sample of 77,241 U.S. ventures founded between 2014 to 2017, we find evidence that place-based certifications indeed improve firm performance and help audience members avoid conflating their own contextual unfamiliarity with venture quality. We offer guidance for rethinking and advancing organizational theory to direct attention towards marginalized contexts. We make theoretical contributions that unshackle certification from its dependency on quality in hopes of broadening access to those who can acquire and benefit from certifications.