How SMEs’ Innovativeness Affect ISO Certification Strategy and Its Outcome

Abstract

Innovation studies show that innovative firms may be more likely to change existing routine and operation procedures and create new ones. The neoinstitutionalism, however, suggests that innovative enterprises suffering with strong legitimacy constraints may well be isomorphic. However, there has been little empirical research on when and in what way, and with what outcome innovative firms respond to institutional constraints. This paper integrates legitimacy perspective with innovation strategy literature, proposes that, innovative firms are more likely to using ISO certification strategy, and institutional constraints strengthen the relationship between innovativeness and ISO certification which is suggested as a symbolic legitimization strategy and thus can boost organization performance, regardless of it’s effect on product quality. We test these hypotheses using a sample of 639 SMEs collected from a nationwide survey on SMEs held by the Chinese SME Association. And the results showed that innovative SMEs are more likely to get ISO certification, because of facing more rigorous and multiple complex institutional constraints, innovative SMEs having export business are more likely to implementing ISO certification legitimating strategy than the innovative SMEs having no export business, and ISO certification boosted SMEs growth performance. This study provides the first Chinese evidence showing how institutional constraints affect innovative SMEs’ ISO certification strategy, which further influence organizational growth.