Just a Piece of Paper? Domestic Standards Certification and Small Firm Growth in Viet Nam

Figures & data

Table 1. Number and proportion of firms with a domestic and/or an international certificate (2015)

Type of certificate	#	%
Domestic certificate	410	21.84
International certificate	52	2.77
Domestic and international certificate	44	2.34
Total observations	1,877

Notes: The first row displays the number of firms with a domestic certificate (DC) and their proportion with respect of the total sample (1,877). Among the 410 firms with a domestic certificate (DC), 248 firms (13.2% of the total sample) have a Quality certificate (QC), 228 (12.5% of the total sample) have an Environmental standard certificate (ESC), and 66 (3.52% of total sample) have both types of domestic certificates. The second row displays the number of firms with an international certificate (IC) and their proportion with respect of the total sample. The last row displays the number of firms with both a domestic and an international certificate and their proportion with respect of the total sample.

Table 2. Number and proportion of firms with a domestic and/or an international certificate by province and sector (2015)

	Total sample		DC		IC		Both
	#	%	#	%	#	%	#	%
Province
Ha Noi	208	11.08	49	23.56	12	5.77	9	4.33
Phu Tho	202	10.76	14	6.93	1	0.49	0	0.00
Ha Tay	267	14.22	32	11.99	2	0.75	2	0.75
Hai Phong	154	8.20	30	19.48	11	7.14	11	7.15
Nghe An	247	13.16	43	17.41	9	3.65	9	3.65
Quang Nam	136	7.25	30	22.06	0	0.00	0	0.00
Khanh Hoa	69	3.68	25	36.23	2	2.90	2	2.90
Lam Dong	69	3.68	30	43.48	1	1.45	1	1.45
HCMC	419	22.32	124	29.59	13	3.10	9	2.15
Long An	106	5.65	33	31.13	1	0.94	1	0.94
Sector
Food and beverages	636	33.88	223	35.06	12	1.89	9	1.41
Textiles	53	2.82	5	9.43	0	0.00	0	0.00
Apparel	76	4.05	7	9.21	0	0.00	0	0.00
Leather	40	2.13	6	15.00	2	5.00	2	5.00
Wood	209	11.13	8	3.83	1	0.48	0	0.00
Paper	42	2.24	16	38.10	4	9.52	4	9.52
Publishing and printing	56	2.98	9	16.07	0	0.00	0	0.00
Chemical products	37	1.97	14	37.84	6	16.22	5	13.51
Rubber	109	5.81	36	33.03	3	2.75	3	2.72
Non-metallic mineral	77	4.10	19	24.68	3	3.89	2	2.60
Basic metals	20	1.07	7	35.00	0	0.00	0	0.00
Fabricated metal products	337	17.95	32	9.50	11	3.26	9	2.67
Electronic machinery	40	2.13	9	22.50	6	15.00	6	15.00
Vehicles and transport equipment	14	0.75	4	28.57	1	7.14	1	7.14
Furniture and jewellery	131	6.98	15	11.45	3	2.29	3	2.29
Total observations	1,877	100	410	21.84	52	2.77	44	2.34

Notes: The first column displays the number of firms by province or sector, while the second column shows the distribution of the total sample of firms (1,877) along different provinces and sectors. The third columns displays the number of firms that have a domestic certificate (DC), while the fourth column shows these domestically certified firms as proportion of the firms in the same province or sector. The fifth column displays the number of firms owning an international certificate (IC), while the sixth column shows these internationally certified firms as proportion of the firms in the same province or sector. The seventh columns presents the number of firms owning both a domestic and an international certificate, while the eighth column shows these certified firms as proportion of the firms in the same province or sector.

Table 3. Variables definitions and summary statistics

Variable	Description of variables used in the empirical analysis	Av.	SD	Min	Max
Main variables of interest
Domestic certificate ($D{C}_{j_t}$)	= 1 if firm has a domestic quality standard certificate (QC) or an environmental standard certificate (ESC) in 2015.	0.22	0.41	0	1
Certificate ($Cer{t}_{j_t}$)	Ordered categorical variable that takes the following values: 1 if firm does not have any certificate in 2015;	1.25	0.49	1	3
	2 if firm has only a domestic certificate (DC) in 2015; 3 if firm has an international certificate (IC) or both an international and a domestic certificate, in 2015.
Sales growth ($S{G}_{j_t}$)	Average annual sales growth, calculated as the difference between the logarithmic value of sales over fiscal years 2014 and 2012, divided by 2.	0.00	0.38	−2.33	1.69
Transaction costs (${w_{j_t}}_1$)
Distance from costumier (log)	Distance in km from the main costumier in 2015, in log.	2.15	1.51	−4.61	7.44
Distance from costumers (km)	Distance in km from the main costumier in 2015.	29.27	95.83	0.01	1,710
Institutional pressure ($w_{jt}2$)
Local trade union	= 1 if firm has a local trade union in 2015.	0.08	0.27	0	1
Inspected	= 1 if firm has been inspected by government officials during the previous year (2014).	0.35	0.48	0	1
Certification required by customers	= 1 if firm declare that costumers would require a certification (of any kind) in 2015.	0.07	0.26	0	1
Business association	= 1 if firm is member of a business association in 2015.	0.07	0.25	0	1
Neighbour certificates (share)	Share of firms with a domestic certificate (excluding the observed firm) in or before 2013, by district.	0.16	0.11	0	1
Labour code	= 1 if firm has a good or average knowledge of the labour code in 2015.	0.30	0.46	0	1
Internet	= 1 if firm has Internet connection in 2015.	0.37	0.48	0	1
Website	= 1 if firm has a website in 2015.	0.08	0.27	0	1
Firm-level characteristics and cost of certificate ($w_{jt}3$)
Sales (million VND, lagged)	Sales, in million VND, over fiscal year 2012. Deflated using the Vietnamese GDP deflator (base year 2010) provided by the World Bank Development Indicators.	4,234.91	10,812.72	16.14	135,390.28
Sales (log, lagged)	Sales as defined above, in log.	6.55	1.45	2.19	11.22
Firm age (years)	Age of firm in 2015, in years	17.84	10.11	2.00	61.00
Firm age(log)	Age of firm in 2015, in log.	2.74	0.54	0.69	4.11
Employment (regular employees, lagged)	Employment, measured by number of full-time regular workers plus the number of part-time regular workers weighed 0.6, lagged (end of 2012).	9.85	18.29	1.00	214.00
Employment (log, lagged)	Employment as defined above, in log.	1.67	0.98	0.10	5.37
Cost of domestic quality certificate (log)	Average of the cost of domestic quality certificate in thousand VND in 2015, by province and sector 4-digit, in log.	15.26	1.46	10.82	17.73
Ownership type
Household	= 1 if firm is an household or private sole proprietorship enterprise.	0.76	0.43	0	1
Partnership and collective	= 1 if firm is a partnership or collective enterprise.	0.02	0.14	0	1
LSC	= 1 if firm is a limited liability company or a joint stock company.	0.22	0.42	0	1
Operational improvements ($O{I}_{j_t}$) and innovation ($IN{N}_{j_t}$)
Innovation	= 1 if firm has introduced a product improvement or a process innovation since last survey in 2013.	0.14	0.35	0	1
Training	= 1 if firm provides training to workers in 2015	0.04	0.20	0	1
Environmental treatments:
Fire	= 1 if firm treats for fire control in 2015.	0.34	0.47	0	1
Air	= 1 if firm treats for air control in 2015.	0.05	0.22	0	1
Waste	= 1 if firm treats for waste control in 2015.	0.08	0.28	0	1
Other	= 1 if firm treats for other environmental controls (water, soil pollution, noise, lightning, etc.) in 2015.	0.32	0.47	0	1
Other variables
Female respondent	= 1 if the respondent (manager or owner) is female in 2015.	0.40	0.49	0	1

Table 4. Determinants of domestic certification: marginal effects

Dep. variable:	(1)	(2)
Domestic certificate	Probit	Probit SE
Transaction costs
Distance from costumier	0.009*	0.012**
	(0.005)	(0.005)
Institutional pressure
Neighbour certificates	0.282***	0.239***
	(0.076)	(0.078)
Business Association	0.064**	0.057**
	(0.029)	(0.029)
Local trade union	0.057*	0.061**
	(0.030)	(0.027)
Inspected	0.059***	0.064***
	(0.015)	(0.015)
Certification required by customers	0.308***	0.297***
	(0.029)	(0.028)
Internet	0.083***	0.079***
	(0.021)	(0.021)
Labour code	0.029	0.039**
	(0.018)	(0.018)
Cost and firm-level characteristics
Cost of domestic quality certificate	−0.028***	−0.026***
	(0.007)	(0.007)
Employment (lagged)	0.059***	0.064***
	(0.012)	(0.011)
Firm age	0.031**	0.033**
	(0.014)	(0.015)
Partnership and collective	0.005	0.01
	(0.053)	(0.050)
LSC	0.049**	0.041*
	(0.025)	(0.025)
Sector	Yes	Yes
Location	Yes	Yes
Obs.	1,876	1,876

Notes: Average marginal effects (AME) are showed (probit coefficients are reported in Supplementary Materials). Location is accounted for with region dummies, due to the presence of a sector-province level variable. Standard errors in parentheses *p $<$ 0.10, **p $<$ 0.05, ***p $<$ 0.01.

Table 5. Sales growth: main drivers

Dep. variable:	(1)	(2)	(3)	(4)	(5)
Sales growth	OLS	Probit	Probit	OLS	Oprobit
		SE	SE		SE
Domestic certificate	0.075***	0.212***	0.169***
	(0.023)	(0.042)	(0.048)
Domestic certificate only				0.069***	0.181***
(Certificate = 2)				(0.023)	(0.038)
International certificate				0.122**	0.331***
(Certificate = 3)				(0.056)	(0.078)
Sales (lagged)	−0.277***	−0.257***	−0.254***	−0.270***	−0.251***
	(0.064)	(0.056)	(0.056)	(0.065)	(0.056)
Sales (lagged), sq	0.006*	0.004	0.004	0.006	0.004
	(0.004)	(0.003)	(0.003)	(0.004)	(0.003)
Firm age	−0.020	−0.020	−0.034	0.016	−0.024
	(0.133)	(0.133)	(0.133)	(0.148)	(0.133)
Firm age, sq	−0.027	−0.027	−0.025	−0.028	−0.027
	(0.019)	(0.019)	(0.019)	(0.019)	(0.019)
Revenues (lagged)*	0.022*	0.020*	0.021*	0.022*	0.021*
Firm age	(0.013)	(0.011)	(0.011)	(0.013)	(0.011)
Partnership and collective	0.168***	0.157**	0.159***	0.167***	0.155**
	(0.059)	(0.061)	(0.061)	(0.060)	(0.061)
LSC	0.162***	0.147***	0.145***	0.161***	0.143***
	(0.029)	(0.027)	(0.027)	(0.028)	(0.028)
Innovation	0.088***	0.083***	0.084***	0.087***	0.082***
	(0.025)	(0.024)	(0.024)	(0.025)	(0.024)
Internet	0.103***	0.085***	0.085***	0.103***	0.087***
	(0.021)	(0.023)	(0.023)	(0.021)	(0.023)
Training for existing workers	0.073	0.060	0.062	0.072	0.058
	(0.048)	(0.041)	(0.041)	(0.048)	(0.041)
Fire	0.078***	0.074***	0.074***	0.079***	0.074***
	(0.023)	(0.024)	(0.024)	(0.023)	(0.024)
Air	0.064	0.065*	0.064*	0.062	0.060
	(0.041)	(0.038)	(0.038)	(0.041)	(0.038)
Waste	0.072**	0.069**	0.071**	0.072**	0.068**
	(0.031)	(0.031)	(0.031)	(0.031)	(0.031)
Other	−0.024	−0.028	−0.028	−0.025	−0.028
	(0.021)	(0.020)	(0.020)	(0.021)	(0.020)
Female respondent			−0.002
			(0.020)
Domestic certificate*			0.080**
Female respondent			(0.039)
Constant	1.277***	1.196***	1.206***	1.256***	1.195***
	(0.345)	(0.310)	(0.310)	(0.347)	(0.310)
Sector	Yes	Yes	Yes	Yes	Yes
Province	Yes	Yes	Yes	Yes	Yes
lnsig_2		−1.057***	−1.059***		−1.058***
		(0.017)	(0.017)		(0.017)
atanhrho_12		−0.285***	−0.279***		−0.246***
		(0.076)	(0.077)		(0.068)
Obs.	1,876	1,876	1,876	1,876	1,876
Degrees of freedom	29	51	53	30	52
R squared	0.18	0.18	0.18	0.18	0.18

Notes: The base category of the ordered categorical variable Certificate corresponds to firms that do not have any certificate. The coefficients of the probit and oprobit models are reported in Supplementary Materials. Standard errors in parentheses *p $<$ 0.10, **p $<$ 0.05, ***p $<$ 0.01.

Table 6. The effect of domestic certificates on sales growth: different samples

	(1)	(2)	(3)	(4)	(5)	(6)
	With exporting firms		HH	other	HH	other
				ownership		ownership
	Probit SE	Oprobit SE	Probit SE	Probit SE	Oprobit SE	Oprobit SE
Domestic certificate	0.248***		0.227***	0.243***
	(0.041)		(0.048)	(0.091)
Domestic certificate only		0.208***			0.232***	0.147**
(Certificate = 2)		(0.036)			(0.048)	(0.068)
International certificate		0.378***			0.356**	0.282**
(Certificate = 3)		(0.068)			(0.170)	(0.115)
Obs.	1,993	1,993	1,422	454	1,422	454
Degrees of freedom	50	51	47	47	48	48
R squared	0.16	0.16	0.21	0.15	0.21	0.15

Notes: In all columns the specification of the sales growth equation includes the same covariates used in the models reported in Column (2) and (4) in Table 5. In column (1) and (2) a dummy for being an exporter is introduced as additional control. Standard errors in parentheses *p $<$ 0.10, **p $<$ 0.05, ***p $<$ 0.01.

Figure 1. Balance box plot: domestic certificate

Notes: The plot has been obtained by implementing one-to-three nearest neighbour.

Table 7. Average treatment effect on the treated (ATET)

Matching method	ATET	SE	t-stat
Panel A
One-to-one nearest neighbour	0.116***	0.039	2.98
One-to-three nearest neighbour	0.079**	0.032	2.47
Kernel	0.090***	0.029	3.80
Observations	1,874
Panel B
One-to-one nearest neighbour	0.083**	0.040	2.06
One-to-three nearest neighbour	0.091**	0.034	2.66
Kernel	0.081**	0.031	2.63
Observations	1,822

Notes: In Panel A the treated group also includes the 44 firms that have both a domestic and an international certificate. In Panel B the treated group includes firms that have only a domestic certificate, as the 52 firms with an international certificate have been excluded from the sample. The presented results have been obtained implementing the STATA command psmatch2. Alternative STATA commands for PSM, such as teffect psm (Abadie & Imbens, 2016) and pscore (Becker & Ichino, 2002), generate similar results. The results fulfill all conditions required for the application of PSM, such as the conditional independence assumption, the presence of a common support, and the satisfaction of the balancing property. *p $<$ 0.10, **p $<$ 0.05, ***p $<$ 0.01.

Abadie, A., & Imbens, G. W. (2016). Matching on the estimated propensity score. Econometrica, 84(2), 781–807.

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Becker, S., & Ichino, A. (2002). Estimation of average treatment effects based on propensity scores. The STATA Journal, 2(4), 358–377.

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