The Relationship between ISO 9000 and Business Performance: Does Registration Really Matter?

At the beginning of this decade, acceptance of the quality system standard ISO 9000 by U.S. companies appeared uncertain. In 1992, a survey of midsize U.S. firms by consultants at Grant Thornton found that 48% had not heard of the quality system standard ISO 9000, and only 8% planned to become certified by the end of that year. The survey also revealed only 11% of those companies thought ISO 9000 would affect them much at all (Wall Street Journal, 1992). Four years later, a similar survey by these same consultants discovered that by the end of 1998, 52% of all midsize U.S. manufacturers planned to be ISO 9000 certified (Wall Street Journal, 1996). This unexpected turnaround in favor of ISO 9000 is not unique to the U.S. Worldwide, the number of ISO 9000 companies has grown from a mere handful in 1987 to an estimated 200,000 registered sites as of 1997 (Goodman, 1998). In fact, ISO 9000 is arguably the most influential standard of its kind in the world. This rapid acceptance of ISO 9000 suggests that many firms find that the standard is well written and worth observing, in spite of the fact that there is no compelling evidence that the standard is ultimately good or bad (Uzumeri, 1997). The theory implicit among practitioners that ISO 9000 can contribute to competitive advantage has attracted little interest from researchers. Yet many firms are increasingly questioning the link between ISO 9000 and business performance. Does the size of the firm affect the benefits obtained? Do firms that are committed to international markets or export extensively benefit more than firms competing domestically? (Brown et al., 1995). Does ISO 9000 registration really matter? The purpose of this research is to begin to establish an empirical answer to this question. While there has been much published work on various issues associated with ISO 9000, research in this area has lacked systematic measurement and multi-organization comparisons. The literature on ISO 9000 is overwhelmingly either prescriptive or descriptive, with studies that are speculative, anecdotal, and often based on the observation of only a single company (Ebrahimpour et al., 1997). This study will compare multiple, objective performance measures of 63 ISO companies to 63 non-ISO companies in the electronics industry. The results obtained from the research help to empirically clarify the value of the ISO 9000 quality system standard. ISO 9000: What It Is, Isn't, And Why Companies Pursue It According to ANSI/ISO/ASQC 9000-1-1994, the ISO 9000 standard is intended to provide a generic core quality system that can be applied to a broad range of industry and economic sectors. As a quality system standard, it is concerned about how quality is managed by a company but it does not directly address product quality (Jackson and Ashton, 1995). The ISO 9000 standard describes what elements quality systems should encompass but not how a specific organization should implement these elements. The standard intends for each organization to design and implement a quality system that works for its specific products, processes, and practices. The most comprehensive standard, ISO 9001, includes management responsibilities for the quality system, procedures for contract review, and procedures to control and verify product design. ISO 9002 differs only in that it does not address product design. Certification that an organization's quality system meets the requirements of the ISO standard is established by an independent third party selected by the organization. The time required for a firm to achieve certification of one of its sites could range from six months to two years, but is typically around one year. Depending on the size of the plant, the cost to prepare a site for ISO 9000 ranges from $15,000 to $1 million. The typical cost to prepare a medium sized plant for ISO 9001 is $250,000 (Peach, 1997; Uzumeri, 1997; Zuckerman, 1997). Because of the time, effort, and cost required to obtain ISO 9000 certification, along with the proposed organizational benefits, the decision to pursue ISO 9000 is most likely a strategic one made by the organization's top management team. …