Order without law? the role of certified management standards in shaping socially desired firm behaviors

Signaling without Certification: The Critical Role of Civil Society Scrutiny

“…These papers theorize that firms with inferior management capabilities will forgo participation because the costs of implementing the policies and procedures required to pass the certification audit exceed the anticipated benefits. In contrast, firms with superior management capabilities will participate because the anticipated benefits of meeting the program's requirements exceed the costs (Terlaak, 2007). Some have argued that self-regulatory programs that lack third-party auditing requirements cannot be credible signals as they allow for free-riding because it would be no costlier for firms with inferior capabilities to join than for firms with superior capabilities (Darnall and Carmin, 2005;Lenox and Nash, 2003).…”

“…Such programs serve as credible signals when meeting their standards is sufficiently more costly for companies with inferior management capabilities such that they forego participating (Darnall and Carmin, 2005;Darnall and Edwards, 2006;Terlaak, 2007). Programs featuring third-party certification impose two types of costs on participants: (1) the managerial effort, technology, and equipment required meet the program's standards, and (2) a fee paid to a third-party auditor to attest that the standards have been met.…”

Marking Their Own Homework: The Pragmatic and Moral Legitimacy of Industry Self-Regulation

“…Given the focus on the firm level, strategic perspectives tend to emphasize short-term, direct and measurable effects of ISR participation. In contrast, institutional perspectives consider not only behaviour changes by individual social actors within a field (Terlaak 2007), but also the longer-term field reconfiguration as an ISR scheme becomes institutionalized (Hofman 1999;Haack et al 2012). Critical perspectives examine longer-term and diffuse effects of ISR schemes, including how ISR alters symbolic representations of reality (Boiral 2013) and the overall governance within a policy domain (Renard 2005).…”

“…Indeed, one of the problems in evaluating ISR effectiveness is the different ideologically driven perspectives on ISR effectiveness from whose perspective, over what time period and as compared to what (Gupta and Lad 1983). Past studies have assessed the consequences of ISR schemes by examining the extent to which schemes fulfil the functional or governance functions they were designed to serve (Hahn and Pinkse 2014;Wijen 2014), whether they encourage participation (Prado and Woodside 2015;Schuler and Christmann 2011), whether they trigger pro-social behaviour change in participating firms (Terlaak 2007;Schuler and Christmann 2011), whether they improve allocative efficiency (Maxwell et al 2000;Fleckinger and Glachant 2011) and ultimately whether they deliver material improvements in the social domains they are designed to address (Blackman and Rivera 2011;Darnall and Sides 2008;Aravind and Christmann 2011).…”

Quality signaling through ex-ante voluntary information disclosure in entrepreneurial networks: evidence from franchising

“…In economics and strategic management, there is a large body of literature that supports signaling quality through third-party certification and commitment to standards. For example, Terlaak (2007) examines 'certified management standards' as a potential signal of quality, since they are less costly to acquire for firms with higher quality standards.…”