2.3. Hypotheses Development
The following hypotheses are proposed based on the dynamic capability theory to explain how certification provide a learning and capacity development platform for firms to improve efficiency in handling sustainability issues. Such efficiency can be generated and enhanced if firms go through the initial participation hurdle, conduct trial-and-errors in different certification types, scale up the volume of certifications, accumulate certification experience, and accumulate capacity over time. The following section will explain the hypotheses development in detail.
We suggest that firms with certified management standards tend to gain higher efficiency in their pursuit of sustainability than firms without such certifications for the following reasons. The first reason relates to firms’ chances of resource integration and continual social and environmental improvement. Implementing and certifying the first management standard remains a big hurdle for many firms. If firms successfully mobilize resources to develop their initial management standard system and infrastructure, they may obtain a continuous learning opportunity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness [
38]. During the implementation process, a certified firm may gradually develop capacity to efficiently pursue quality, environmental, and social goals, usually resulting in significant cost-savings and continuous advancement.
The second reason relates to firms’ chances to improve stakeholder relationships and engagement. A certified organization is required to update and innovate its business procedures and strategies to comply with the requirements and expectations of both internal and external stakeholders. Involvement in a certification process enables firms to strengthen awareness of their existing environmental and social activities and impacts, as well as their responsibility to diverse stakeholders [
39]. Relative to internal stakeholders, the certification process requires a high employee engagement level, which enables organizations, especially managers and executives, to pay closer attention to its human resources and explore means to enhance employee engagement, a key asset for achieving process success [
40]. The intensive employee training and human resource governance associated with certification may contribute to a firm’s continual competitiveness and enhanced capability to deal with internal social issues more effectively [
41].
Additionally, the certification process requires firms to accommodate external stakeholders’ requirements, as well as compile and report social and environmental performance data to external stakeholders following standard formats and procedures. During this process, certified firms may grow their transparency and authenticity in voluntary reporting, thus developing stronger relationships with key external stakeholders, such as customers, employees, suppliers, governments, and communities [
3,
9,
42]. Such tacit assets enhance brand value and reputation, from which may be derived capability for certified firms to pursue sustainability with higher efficiency [
43,
44].
The third reason relates to improvements in organizational structure and culture. The certification process provides a dynamic mechanism or system that allows firms to continually adapt to, become embedded in, or gradually modify in their own culture and structure to facilitate a successful implementation. During a system’s implementation process, an organizational structure and culture may become more coordinated and harmonized such that processes can be integrated smoothly and effectively. As such, a certified management system may facilitate the modification or transformation of organizational structures and culture in a way that enhance firms’ likelihood to enhance their CSE.
In summary, certified firms may gain greater efficiency in pursuing sustainability goals than non-certified firms because of their gained access to process-focused sustainability practices, and their need to conform to routines and procedures that engage internal employees and strengthen external stakeholder relationships. This, we posit, may augment firms’ dynamic capabilities to tackle quality, social, and environmental improvements more effectively.
Hypothesis 1: Certified firms obtain greater efficiency in their pursuit of sustainability than non-certified firms.
In response to diverse stakeholders, firms may decide to adopt more than one management system. When two or more management systems with different functions are implemented by an organization, synergism may occur when the varied systems are combined and integrated within that organization to collectively address corporate social and environmental issues. We refer to this pathway of efficiency gain (in pursuit of sustainability) as “qualitative combination”.
Some studies demonstrate that over time firms show an increased tendency to integrate their management standards rather than keeping them separated, despite the existence challenges, such as the complexity of internal management and increased management costs [
45]. It is often easier and appealing for organizations with existing certification(s) to adopt and assimilate another related management systems as such combination may improve implementation efficiency and enhance dynamic capability building. For instance, ISO 9001 often leads to improvements that allow further certification under ISO 140001 [
46]. Firms that integrate varied certifications may gain higher efficiency since overall costs of system adoption and system management can be lower as firms develop practices that integrate and combine resources [
47].
Specifically, the varied certifications can be bundled and integrated in a way to derive synergies and greater benefits, including reduced paperwork and training, avoided duplication of effort, simplified certification processes, improved learning processes, and increased organizational efficiency [
48,
49]. Evidence also shows that management system combination and integration can enhance corporate image and improve financial and operational performance [
50]. Firms may deliver better products and services when their organizational systems can be integrated and focused on same targets [
51]. Such integrated management systems may allow a firm to improve customer satisfaction while also increasing product innovation [
49]. Due to the potential benefits associated with the combination of varied management standards, we propose that:
Hypothesis 2: Firms with a variety of certification standards obtain greater efficiency in their pursuit of sustainability than firms with homogeneous certification standard.
In addition to qualitative combination, firms may accumulate and scale up their dynamic capacity and obtain greater efficiency in pursing sustainability by expanding their total numbers of certifications, for instance through re-certification of a same management system in the following years or through certifying different facilities with the same management system. We refer to this pathway of efficiency gain (in pursuit of sustainability) as “quantitative expansion. It is conceptually distinct from qualitative combination as it focuses on scaling up the experience of a single type of certification throughout the organization rather than exploring the combination of different management systems.
Certifying for a large number of certifications across different facilities and branches may allow firms to replicate their matured practices at multiple facilities and branches within an organization, thus scaling up the efficiency gain in their pursuit of sustainability goals over the entire firm. Moreover, incremental improvements may occur as increasing numbers of certifications are implemented on multiple levels within an organization, ranging from the top “management” (i.e., strategic synergetic) level to the second “resource” (i.e., structural, and cultural synergetic) level, and the third “operational” (i.e., documentation synergetic) level [
40]. Advantages generated from the synergetic effects of numerous certifications within an organization can translate into greater efficiency gain (in their pursuit of sustainability) associated with economies of scale and decreased operational costs [
52]. We, therefore, posit that:
Hypothesis 3: Firms with larger number of certifications obtain greater efficiency in their pursuit of sustainability than firms with fewer certifications.
Since management systems are process-focused, it takes time for the various features of a new management system to be assimilated into a specific organisation. It also takes time and experience for certified firms to extract the efficiency outcome associated with their qualitative combination of diverse management standards, and/or quantitative expansion of a certain management standard to a larger scale. We refer to this pathway of efficiency gain (in pursuit of sustainability) as “temporal accumulation” [
24].
Specifically, a firm’s environment is constantly changing during the course of certification and implementation [
53]. Temporal accumulation may stimulate certified firms’ dynamic capacity to improve efficiency through “learning by doing” [
54]. In this sense, we suggest that a firm’s experience with certification enhances its ability to extract more sustainable development outcomes out of the current certification program. Because these firms have evaluated a diverse set of environmental concerns in their previous certification, they may have tested different approaches in dealing with a varied array of regulatory, technological, human, social (employee), and political factors involved in the certification process. This prior experience makes firms more aware of different aspects of its current certification program, enhances a firm’s ability to communicate with internal and external stakeholders in the environmental and social domain, and allows firms to steer new sustainable developments more effectively—all of which are important capabilities to enhance efficiency in firms’ pursuit of sustainability through the certification program. On this basis, we suggest:
Hypothesis 4a: Firms with prior certification experience obtain greater efficiency in their pursuit of sustainability than firms without the experience.
Regarding the temporal effect of firms’ certification history, we assume that firms’ certification history may have a negative effect to CSE initially but gradually demonstrate a positive effect to firms’ efficiency gain in the long run. The first reason for this relates to the adoption of different versions of certification, which may lead to variances in efficiency gain. For example, the older versions of management systems (such as ISO 9001:1994 or 2000 version) were not perfectly designed when first released. Management systems have undergone major modifications and improvements in recent years. These modifications and the addition of updated management systems (i.e., ISO 14001, OHSAS 18001, and, in particular, ISO 9001:2008 version) have greatly enhanced their compatibility and effectiveness [
42]. Therefore, firms with longer certification histories may have developed their operational infrastructure based on a less effective version of certification, resulting in diminished effects in their gained efficiency during initial years.
The second reason relates to enhanced organizational complexity and cost during their initial years of implantation. Over the long run, however, the ongoing expenses of standard operation (marginal cost) are expected to decrease gradually. Meanwhile, the effectiveness of these management systems is likely to continually improve with time. As such, there are long-term benefits associated with management system certification. Longer exposure to management systems allows firms to better assimilate knowledge and gradually develop capacity to improve efficiency in firms’ pursuit of sustainability improvement. Successfully implementing management systems over a long period may also introduce cultural and structural changes of an organization, resulting in higher efficiency gain in firms’ pursuit of sustainability goals [
55]. Consequently, we assume that:
Hypothesis 4b: There is a “U-shaped” relationship between firm’s certification history and an enhanced efficiency in their pursuit of sustainability.
In summary, certifications may foster effective learning and dynamic capacity development for certified firms to improve their efficiency in pursuing sustainability through four pathways—certification participation, qualitative combination, quantitative expansion, and temporal accumulation [
56].