Certification in the Indian Offshore IT Services Industry

Third-party process certification programs such as the ISO 9001 and capability maturity model (CMM) have been widely adopted in recent years. In this study we employ three competing theoretical frameworks—signaling, efficiency gains, and institutional theory—to analyze the motivations for a firm to acquire quality certification and the performance implications thereafter. We test these hypotheses in the context of CMM certification based on data from the Indian offshore IT services industry between 1997 and 2002. Our results indicate that more cost-effective firms and export-oriented firms are more likely to seek out and acquire certification. In addition, CMM-certified firms show significant improvements in exports, but not on the firm's cost structure. Furthermore, our findings suggest that CMM certification helps indicate firm capabilities to potential customers and thus appear to be most consistent with signaling explanations of certification rather than the efficiency gains or institutional theories.