Self-Regulation by Associations: Collective Action Problems in European Environmental Regulation

Abstract

How and to what effect do firms coordinate their actions to deal with the negative external effects of productive activity? Under which conditions do associations engage in self-regulation and how do they tackle the specific regulatory challenges at stake? When developing hypotheses, we first vary attributes of the information environment in which private actors interact; and, secondly, actors' preferences as a function of the problem type at hand. With respect to the environmental conditions, our findings show that a regulatory threat matters when developing associative action, whilst the evidence is less clear as regards NGO campaigns. In terms of the problem type, we find that redistributive issues and prisoner's dilemma situations are much more conflict prone than coordination/win-win type of problems. Industry actors recur to various governance devices such as flexible contract design and compensation mechanisms to solve redistributive problems. Prisoner's dilemma (PD) problems may only partially be addressed by governance devices to the extent that free-riding is controlled and sanctioned within an association. We conclude that private actors engaging in self-regulation will not successfully manage all types of conflicts. They lack powerful sanctioning tools to deal with PD situations, but prove to be able to flexibly handle redistributive problems.

What do business associations do?

“…Public-order incentives allow co-regulatory BAs to tackle most conflictual prisoner's-dilemma types of collective action problems. They can institutionalize even stronger sanctions to support quality and ethical regulations, contributing to contract enforcement (Coleman, 1989;Muraközy − Valentiny, 2015), property rights protection (Mikamo, 2013;Yakovlev et al, 2014) and the management of social conflicts (Bartle − Vass, 2007;Héritier − Eckert, 2009;Marques, 2017;Rees, 1997). They can combine public and private resources to provide public goods related to infrastructure and knowledge provision (Athreye − Chaturvedi, 2007;Hashino − Kurosawa, 2013).…”

The advocacy-growth nexus: the case of the Egyptian banking sector

“…One example is the formal alliance between business membership organisations (BMOs) on the one hand and bankers and regulators on the other hand (Leftwich, 2009). But Héritier and Eckert (2009) warn that this could stand witness to the "shadow of hierarchy" in the decision-making process.…”

Institutional Predictors of and Complements to Industry Self‐regulation with Regard to Labor Practices

“…Industry actors may be much more prone to self‐regulate if the industry experiences large amounts of attention from other stakeholders, like NGOs concerned about labor or environmental issues (Estlund ; King and Lenox ). At the same time, the amount and type of attention perceived by the industry may also determine the motivation for self‐regulation (Héritier and Eckert ; Patterberg ). Industries directly affecting the well‐being of populations or entities that require more care, such as industries that deal directly with children (Hemphill ; Miyazaki et al ) or the environment (Christmann ), may be exposed to much stronger pressures for self‐regulation than industries with more complex or indirect stakeholder structures.…”

“…In industries with numerous international participants, self‐regulation may serve a distinct purpose in that it presents an opportunity for standardization that can level the playing field for all members (Clarkson ; Wright and Rwabizambuga ). This is not only important with regard to economic costs but also because of reputation effects and the likelihood of possible domestic or foreign government intervention (Héritier and Eckert ; King and Lenox ; Young ). With regard to labor issues, self‐regulation can create a consistent set of standards for members that then reduce the likelihood that any one member of the industry will act opportunistically by exploiting workers and sullying the industry's image (Agre ; Miller ).…”