The Role of Information Asymmetries in Firms' Voluntary Decertification from Private Standards
40 Pages Posted: 18 Mar 2021
Date Written: February 2, 2021
Firms pursue third-party certification to private standards to reduce firm-level information asymmetries of certain unobservable characteristics and thus obtain legitimacy. However, when the private standard’s legitimacy dilutes, those same firms have reasons to abandon certifications voluntarily – i.e., decertify. Yet our inductive decertification study reveals a more complex set of dynamics beyond legitimacy dilution, which also facilitates decertification behavior. We identify certification-level information asymmetries associated with the ambiguity of the certification per-se that allows firms to act opportunistically and decertify silently. Finally, our findings also unveil that even in the absence of certification-level information asymmetries between the firm and certain stakeholders, firms are oftentimes granted certification waivers, which create an easier path towards decertification.
Keywords: information asymmetries, legitimacy, private standards, decertification
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