Certifying credibility: When do quality certifications enable foreign technology licensing in low- and middle-income economies?

Firms in low- and middle-income economies (LMIEs) often face substantial information asymmetries when seeking access to foreign technology, as potential licensors may have limited visibility into licensees’ managerial and operational capabilities. Prior research suggests that internationally recognized quality certifications can help mitigate such asymmetries, yet we know little about the conditions under which these signals are perceived as credible by licensors. Drawing on signaling theory, this study advances a conditional signaling perspective, arguing that certifications do not operate uniformly but depend on the informational environment in which they are interpreted. I theorize that certification effectiveness is shaped by informational congruence with other observable firm attributes and contextual cues, specifically firms’ international input linkages (imports), market orientation, and the business obstacles they face. Using panel data on 3,182 manufacturing firms across 39 low- and middle-income economies from the World Bank Enterprise Survey (2003–2020), we find that quality certifications are positively associated with the likelihood of obtaining licensed foreign technology, serving as a baseline effect within LMIEs. However, this effect is significantly contingent on firms’ import activity, domestic versus international market orientation, and the severity of business obstacles, highlighting clear boundary conditions to certification credibility. The findings refine signaling theory by demonstrating when third-party certifications function as reliable governance substitutes in international technology transactions, and they offer new insights into how firms and policymakers in LMIEs can facilitate technology transfer under conditions of institutional and informational constraint.