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Does Private Regulation Preempt Public Regulation?

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  • MALHOTRA, NEIL
  • MONIN, BENOÎT
  • TOMZ, MICHAEL

Abstract

Previous research has emphasized corporate lobbying as a pathway through which businesses influence government policy. This article examines a less-studied mode of influence: private regulation, defined as voluntary efforts by firms to restrain their own behavior. We argue that firms can use modest private regulations as a political strategy to preempt more stringent public regulations. To test this hypothesis, we administered experiments to three groups that demand environmental regulations: voters, activists, and government officials. Our experiments revealed how each group responded to voluntary environmental programs (VEPs) by firms. Relatively modest VEPs dissuaded all three groups from seeking more draconian government regulations, a finding with important implications for social welfare. We observed these effects most strongly when all companies within an industry joined the voluntary effort. Our study documents an understudied source of corporate power, while also exposing the limits of private regulation as a strategy for influencing government policy.

Suggested Citation

  • Malhotra, Neil & Monin, Benoît & Tomz, Michael, 2019. "Does Private Regulation Preempt Public Regulation?," American Political Science Review, Cambridge University Press, vol. 113(1), pages 19-37, February.
  • Handle: RePEc:cup:apsrev:v:113:y:2019:i:01:p:19-37_00
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    Cited by:

    1. Irja Vormedal & Jonas Meckling, 2024. "How foes become allies: the shifting role of business in climate politics," Policy Sciences, Springer;Society of Policy Sciences, vol. 57(1), pages 101-124, March.
    2. Maarten Pieter Schinkel & Leonard Treuren, 2021. "Corporate Social Responsibility by Joint Agreement," Tinbergen Institute Discussion Papers 21-063/VII, Tinbergen Institute.
    3. Dvoskin, Brenda, 2023. "Expertise and Participation in the Facebook Oversight Board: From Reason to Will," Telecommunications Policy, Elsevier, vol. 47(5).
    4. Barry D. Solomon & Shan Zhou, 2021. "Renewable Portfolio Standards: Do Voluntary Goals vs. Mandatory Standards Make a Difference?," Review of Policy Research, Policy Studies Organization, vol. 38(2), pages 146-163, March.
    5. Ekaterina Borisova & Timothy Frye & Koen Schoors & Vladimir Zabolotskiy, 2022. "Fear, Trust and Demand for Regulation: Evidence from the Covid-19 Pandemic in Russia," CESifo Working Paper Series 10156, CESifo.
    6. Gorwa, Robert, 2019. "The platform governance triangle: conceptualising the informal regulation of online content," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 8(2), pages 1-22.
    7. Bimal Arora & Arno Kourula & Robert Phillips, 2020. "Emerging Paradigms of Corporate Social Responsibility, Regulation, and Governance: Introduction to the Thematic Symposium," Journal of Business Ethics, Springer, vol. 162(2), pages 265-268, March.
    8. Kolcava, Dennis & Smith, E. Keith & Bernauer, Thomas, 2022. "Public Preference Formation Towards Sustainable Global Supply Chains Policy," OSF Preprints 2hez9, Center for Open Science.
    9. Schinkel, Maarten Pieter & Treuren, Leonard, 2024. "Corporate social responsibility by joint agreement," Journal of Environmental Economics and Management, Elsevier, vol. 123(C).
    10. Edmund J. Malesky & Layna Mosley, 2021. "Labor upgrading and export market opportunities: Evidence from Vietnam," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 483-513, November.
    11. E. Keith Smith & Dennis Kolcava & Thomas Bernauer, 2024. "Stringent sustainability regulations for global supply chains are supported across middle-income democracies," Nature Communications, Nature, vol. 15(1), pages 1-12, December.
    12. Fu, Tong & Jian, Ze, 2021. "Corruption pays off: How environmental regulations promote corporate innovation in a developing country," Ecological Economics, Elsevier, vol. 183(C).
    13. Du, Shaofu & Huang, Chong & Yan, Xia & Tang, Wenzhi, 2024. "Voluntary green technology adoption: The effects of regulatory uncertainty and competition," European Journal of Operational Research, Elsevier, vol. 315(2), pages 528-540.
    14. Fu, Tong & Yang, Siying & Jian, Ze, 2022. "Government support for environmental regulation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 83(C).
    15. Nicolas Schmid & Leonore Haelg & Sebastian Sewerin & Tobias S. Schmidt & Irina Simmen, 2021. "Governing complex societal problems: The impact of private on public regulation through technological change," Regulation & Governance, John Wiley & Sons, vol. 15(3), pages 840-855, July.
    16. Gorwa, Robert, 2019. "The platform governance triangle: conceptualising the informal regulation of online content," SocArXiv tgnrj, Center for Open Science.
    17. Engebretsen, Rebecca Elisabeth Husebye & Brugger, Fritz, 2021. "Divergent corporates: Explaining mining companies divergent performance in health impact assessments," Resources Policy, Elsevier, vol. 74(C).
    18. Doh, Jonathan P. & Dahan, Nicolas M. & Casario, Michelle, 2022. "MNEs and the practice of international business diplomacy," International Business Review, Elsevier, vol. 31(1).

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