In the LEED: Racing to the Top in Environmental Self‐Regulation

Does voluntary participation in eco‐certification become more substantive over time, or less? Although past research on voluntary programs suggests that later participants are more likely to greenwash by only symbolically adopting voluntary standards, theories of regulatory competition suggest a possible “race to the top.” We argue that participation in voluntary programs can facilitate competition that enables a race, and we advance a theory of self‐regulatory competition to explain dynamics of participation in voluntary environmental programs. Under this perspective, environmental self‐regulation may facilitate a race to the top, despite possibilities for purely symbolic adoption. Analyzing data from a voluntary green building certification program in the United States, we introduce a methodology to distinguish propensities for symbolic certification from more substantive environmental performance. Data demonstrate that later adopters invest additional resources to attain higher certification, becoming greener and suggesting a race to the top in a voluntary greenbuilding certification program.     

Workgroup Climates and Employees’ Counterproductive Work Behaviours: A Social‐Cognitive Perspective

This research examines employees' anticipation of social and self‐sanctions as a self‐regulatory mechanism linking workgroup climates and counterproductive work behaviours (CWBs) and personality as a limit to these effects. A cross‐level study with 158 employees from 26 workgroups demonstrated that in groups with a high compliance climate – a climate emphasizing the importance of complying with organizational rules – employees anticipate more social and self‐sanctions, leading those low in conscientiousness and low in agreeableness to engage less frequently in CWBs. In contrast, a high relational climate – a climate emphasizing the importance of positive social relations over self‐interest – indirectly unbridles the CWBs of these employees by alleviating the social and self‐sanctions they anticipate for CWBs. Climates did not have indirect effects for employees high in agreeableness and high in conscientiousness. These findings elucidate why workgroup climates do not affect the CWBs of all members in the same way.     

The private costs and benefits of environmental self‐regulation: which firms have most to gain?

A (correctly designed) voluntary self‐regulatory scheme can – in theory – improve social welfare if the benefits to society outweigh the costs. However, businesses may not choose to participate in a voluntary scheme if their private benefits do not outweigh their costs; external benefits are irrelevant to the profit maximizing firm. This paper reviews literature on self‐regulation, primarily focusing on factors that influence the net private benefits of environmental programmes. The literature is summarized in a manner that allows one to identify characteristics of firms that are most likely to accrue positive net benefit from environmental programmes, and to determine ways in which self‐regulatory bodies might raise those benefits, thereby increasing participation rates. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment.     

Distinctive Features of Environmental Innovators: An Econometric Analysis

This paper analyzes the main determinants influencing environmental innovators (i.e. firms developing or adopting environmental innovations) in Spain with respect to non‐environmental innovators. Similarly to other contributions in the literature, our results show that Spanish environmental innovators respond to regulatory stimulus in the form of demand‐pull and technology‐push instruments. They have a high internal technological capability and combine internal and external information sources, mostly in cooperation with knowledge institutions. Environmental innovators are more concentrated in mature, traditionally highly polluting sectors, but new firms are not more environmentally innovative than incumbents. Most importantly, in contrast to other environmental innovation studies, mostly carried out in a German context, we have not found evidence of a market pull from either the domestic or international markets. Furthermore, cost savings are not found to be a distinctive driver for environmental innovators. These differential results are possibly related to the special features of Spain regarding its national innovation system and the degree of stringency of environmental regulation and environmental consciousness of its consumers. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

The Red Queen and the environment: reconciling public regulation and business strategy

Until the late 1980s, environmental regulation in Denmark was often carried out in an intensely politicized and confrontational climate marked by strong tensions between authorities and polluting firms. In recent years, however, the general spirit of regulation seems to have improved significantly. During this same period, ‘generic’ measures such as general discharge limits have been supplemented with more specific demands, tailored for individual companies. The present paper presents a case study based on the environmental regulation of TripleNine, a West Jutland fishmeal factory. In response to major changes in its market and regulatory environment, the firm has revised its general strategy and taken a more pro‐active stance on environmental issues, pursuing a policy of active co‐operation with local environmental authorities. Informed by this and other case studies, a theoretical model is developed to account for the incorporation of ecological concerns into firms' general business strategy. Against the background of this model, the paper addresses the long‐term possibilities of reconciling business strategy and public regulation in the future. Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment.     

Mitigating climate change: A role for regulations and risk‐taking

Why do some firms engage in actions to reduce climate change? We propose two counterintuitive mechanisms: high levels of regulation and a firm's increased tolerance for risk. Drawing from insights on how institutional contexts constrain, and enable, prosocial firm behavior, we argue that external pressures, amplified internally by a firm's higher tolerance for risk, increase the likelihood that a greenhouse gas (GHG)‐intensive firm will engage in climate change actions that exceed regulatory requirements. An analysis based on 7,101 observations of U.S. publicly traded firms during the 2013 to 2015 period supports our hypotheses. Our models show high overall prediction accuracy (88.6%) using an out‐of‐time holdout sample from 2016. Moreover, we find that firms that have exhibited environmental wrongdoing are also more likely to engage in beyond‐compliance activities, which may be a form of greenwashing. Thus, more formal and informal regulatory oversight has the potential to spur positive environmental actions. This has implications for a firm's corporate social responsibility actions as well as for climate change regulatory policy.     

Self‐Regulation and the Market for Activism

This paper presents a theory of the market for activism where citizens fund activists, campaigning activists pressure firms to change their practices, and firms self‐regulate to forestall or mitigate campaigns. Activists have leverage because firms must self‐regulate before they are targeted, and their self‐regulation must deter the activists conditional on being targeted. Activists anticipate gaining more from campaigns against soft (more vulnerable) firms than hard (less vulnerable) firms, so it is more costly for soft firms to forestall the activists, and some risk a campaign but self‐regulate to mitigate the probability that the campaign succeeds. Campaigns thus can occur in equilibrium. The threat from activism is the probability that a firm is targeted, and the stronger the threat the fewer campaigns there are because more firms self‐regulate to forestall a campaign. Radical activists target harder firms than do moderate activists, and the more radical the activists the more costly it is to forestall them. Some firms are too hard to be threatened by activism and maximize their profits. Firms that are too hard to target directly may be vulnerable to campaigns threatening their supply and distribution chains. Activists and their donors have an incentive to maximize the scope of activism; that is, the breadth of the threat from activism.     

Supply Chain Management as Private Sector Regulation: What does it Mean for Business Strategy and Public Policy?

The growing practice of environmental supply chain management by firms constitutes private sector regulation that is analogous in many ways to public sector regulation. Similarly to their public counterparts, private sector regulators set standards, apply standards, monitor for compliance, apply sanctions and require corrective action. Private sector regulation differs, however, in the source of authority, external oversight, analytical requirements, public participation and available sanctions. This article argues that supply chain management by firms goes beyond business objectives by creating positive environmental externalities for society, and that more systematic study of the similarities and contrasts between the two forms of regulation may provide valuable lessons for both. Further, it may be possible to increase the effectiveness of private sector regulation to achieve both public societal and private business goals. From a business perspective, supply chain management enables firms to strategically redefine their relationships with government, reduce uncertainty and promote goal‐oriented collaboration. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment     

Activism for Corporate Responsibility: Conceptualizing Private Regulation Opportunity Structures

In this article, we examine how private regulatory initiatives (PRIs) – which define standards for corporate responsibility (CR) issues and sometimes monitor their application by firms – create opportunities and constraints for activist groups aiming to push firms towards more stringent CR activities. Drawing on social movement theory, we conceptualize how private regulation opportunity structures affect such CR‐based activist groups' targets and tactics at both the firm and field levels. At the field level, we argue that both radical and reformative activist groups direct most of their time and resources towards PRIs with comparatively more stringent standards. At the firm level, while radical activist groups are likely to target firms participating in more stringent PRIs, reformative activist groups target firms participating in less stringent PRIs, or those that do not participate in PRIs at all. When facing unfavourable opportunity structures, CR‐based activist groups tend either to advocate the creation of new PRIs or to shift their activities to pressure other focal points. This article contributes to moving beyond extant literature's emphasis of PRIs as settlements of contentious firm–activist interactions towards also viewing them as starting points for activist groups aiming to push firms towards a more substantive CR engagement.     

Environmental and social disclosure and data richness in the mining industry

Self‐regulation by firms and industries in relation to the environmental impact they cause is not a full substitute for more traditional regulation of environmental externalities. However, some self‐regulatory efforts do involve very specific actions that serve to reduce externalities for a specific industry and certainly achieve more than the presentation of a responsible image to the world. An example of such efforts that go beyond common claims about ‘sustainable activities’ is seen in the increasing numbers of mining firms that generate and issue environmental reports. While there is as yet no indisputable proof that reporting has a direct effect on environmental performance, this paper shows that within a single industry there are wide variations in reporting practices and that sincerity is apparent in the process. Copyright © 2003 John Wiley & Sons, Ltd. and ERP Environment     

Automatic‐renewal contracts with heterogeneous consumer inertia

Automatic contract renewals are a common feature in consumer markets. Since these contracts renew automatically unless a consumer actively cancels, firms can use them to exploit consumer inertia. As a source of inertia I study limited attention and investigate how firms use contract renewal to sell to consumers with different degrees of inattention. In monopolistic markets, adverse selection of more‐attentive consumers limits the exploitation of naively inattentive consumers. When signing a contract, naively inattentive consumers overestimate their future probability to make an active cancellation decision. To exploit this mistake, the monopolist wants to target these consumers with large prices after contracts renew. These back‐loaded contracts, however, adversely attract more‐attentive consumers who cancel more often when choosing these exploitative contracts. To mitigate adverse selection, monopolists focus less on exploiting naively inattentive consumers. Adverse selection induces fewer consumer mistakes and can increase efficiency. I show that competition mitigates adverse selection, which induces firms to focus more on exploitation with more back‐loaded pricing. I discuss implications for recently implemented policies on automatic‐renewal contracts.     

Government Engagement,Environmental Policy,and Environmental Performance: Evidence from the Most Polluting Chinese Listed Firms

This study empirically examines the implementation of environmental policies and how government engagement impacts on a firm's environmental performance based on a sample of Chinese listed firms in the eight most polluting industries over a 10‐year period. The findings of the study demonstrate that government engagement, measured as ownership structure, is positively correlated with environmental performance, measured by environmental capital expenditure, for state‐owned firms, but no significant relation is found for non‐state‐owned firms. In addition, non‐state‐owned firms are more likely to perform better in terms of environmental investment after the 2006 enactment of a new policy explicitly linking environmental issues with political incentives to regional governments. This study also reports that corporate environmental performance impairs firm value for state‐owned firms but has no impact on firm value for non‐state‐owned firms, suggesting that investors negatively respond to environmental investments made by state‐owned firms as a result of government engagement/political pressure. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

A TIP OF THE ICEBERG? THE PROBABILITY OF CATCHING CARTELS

Reliable estimates of crime detection probabilities could help in designing better sanctions and improve our understanding of the efficiency of law enforcement. For cartels, we only have limited knowledge on the rate at which these illegal practices are discovered. In comparison to previous works, this paper offers a more parsimonious and simple‐to‐use method to estimate time‐dependent cartel discovery rates, while allowing for heterogeneity across firms. It draws on capture–recapture methods that are frequently used in ecology to make inferences on various wildlife population characteristics. An application of this method provides evidence that less than a fifth of cartelising firms are discovered. Copyright © 2013 John Wiley & Sons, Ltd.     

The effects of certification on total factor productivity: A propensity score matching approach

The primary purpose of this study is to investigate the impact of quality certification on total factor productivity, which is unobservable to and difficult to gauge for firms. To do so, we implement various propensity score matching estimators that handle the self‐selection problem. We use firm‐level data on manufacturing companies in Turkey where firms have devoted significant amounts of resources to get certified. Our findings show that certification does not have any positive effect on total factor productivity. We provide potential explanations for these findings.     

Temporary Help Agencies and Occupational Mobility*

This paper analyses the effects of Temporary Help Agencies (THA) on occupational mobility by performing an empirical comparison of the job‐to‐job upgrading chances of agency and regular (non‐agency) workers in Spain. We estimate a switching regression model to allow for self‐selection into agency work because of, for instance, more motivated workers being more likely to search for jobs through a THA. We find evidence in favour of the existence of self‐selection in all qualification groups considered. Concerning mobility, we find that agency workers in intermediate qualification levels are less likely to experience demotions than regular workers. THA increase the probability of high‐skilled workers achieving a permanent contract in Spain.     

Adverse Selection,Gresham's Law and State Regulation

Regulation is often justified as a response to adverse selection caused by poorly informed buyers and as a means of preventing a ‘race to the bottom’ in competitive markets. This paper argues that competitive markets respond with a variety of institutional mechanisms to problems of adverse selection and that these are often subverted by regulation. Far from Gresham's Law being associated with competitive market processes, it is actually more correctly viewed as the outcome of regulatory intervention that weakens the quality‐protecting incentives that economic agents would otherwise face.     

Incentive effects in the demand for health care: a bivariate panel count data estimation

This paper contributes in three dimensions to the literature on health care demand. First, it features the first application of a bivariate random effects estimator in a count data setting, to permit the efficient estimation of this type of model with panel data. Second, it provides an innovative test of adverse selection and confirms that high‐risk individuals are more likely to acquire supplemental add‐on insurance. Third, the estimations yield that in accordance with the theory of moral hazard, we observe a much lower frequency of doctor visits among the self‐employed, and among mothers of small children. Copyright © 2002 John Wiley & Sons, Ltd.     

Sustainability‐oriented capabilities for eco‐innovation: Meeting the regulatory,technology, and market demands

Despite consensus in the literature that regulation, technology push, and market pull drive eco‐innovation (EI), evidence remains limited on the diverse firm capabilities needed to boost EI. Building on the natural‐resource‐based view of the firm and the EI literature, this paper posits that firms need to renew and realign their capabilities, and ultimately develop distinctive sustainability‐oriented capabilities, in order to meet the rapidly changing regulatory, technology, and market demands. Results of the analysis, based on a survey of U.K. firms, reveal that EIs are more likely to arise when firms (a) build capabilities on voluntary self‐regulation (i.e., executive driven environmental management system and corporate social responsibility) because such organizational capabilities allow them to address increasing regulatory pressures; (b) invest in environmental research and development (i.e., eco‐R&D)—instead of generic research and development—because it provides them with the relevant and specific technological capabilities to tackle technology shifts towards sustainability; and (c) develop capabilities in green market sensing as such capabilities allow them to address green consumption needs.     

The effects of an environmental accountability system on local environmental governance and firms’ emissions

The Chinese central government introduced the environmental accountability system (EAS) policy in 2006 to encourage local governments to execute environmental policies appropriately. However, the effects of this EAS policy have not been investigated at the firm level. In this study, we first measured the environmental governance intensity of local governments by calculating the environment word portion (EWP) of the annual governments’ work reports and found that local governments increased their efforts after the EAS policy implementation. We then constructed a continuous difference-in-difference (DID) strategy to estimate the effect of the EAS on firms’ emission and found that firms significantly reduced their sulphur dioxide (SO₂) emission under the regulation intensity of local governments after the EAS policy. The reductions are mainly because of the private, non-export, labour- and capital-intensive firms. The EAS policy may encourage firms to reduce coal usage, design more products, decrease capacity investment and even withdraw from the market, thus reducing pollutant emission. Finally, we tested firms’ response in various polluting sectors and found that the EAS policy may cause local governments to fail in distinguishing low pollution sectors from high pollution sectors.     

Enron, Herding, and the Deterrent Effect of Disclosure of Improprieties

A bstract    One objective of regulatory investigations of possible improprieties by publicly traded corporations and the imposition of sanctions if malfeasance is found is to deter other corporations from engaging in such behavior. Although the magnitude of the deterrent effect is an empirical issue, this paper provides an a priori analysis as to why the deterrent effect will be blunted in many cases, why its strength will not be uniform over time, and why, based in part on prospect theory, the deterrent effect will be weaker for ongoing questionable practices than for practices in their formative stages.