IDEAS home Printed from https://ideas.repec.org/a/kap/regeco/v54y2018i3d10.1007_s11149-018-9370-1.html
   My bibliography  Save this article

A theory of social license when regulatory pressure is jointly produced by an EPA and an NGO

Author

Listed:
  • Anthony Heyes

    (University of Ottawa
    University of Sussex)

  • Andreas Marcel Oestreich

    (Brock University)

Abstract

We develop a model in which social pressure on a firm to behave well is jointly produced by a state regulator (EPA) and an NGO. The EPA and NGO differ in how they trade-off business versus environmental interests and also have access to different instruments in pursuit of their objectives. In particular, while the EPA will typically have the tools for detecting misbehaviour, the NGO can influence the intensity of social hostility directed towards those found to have misbehaved. EPA and NGO efforts may be strategic complements or substitutes, depending upon circumstances. We present a taxonomy of outcomes in the game between EPA and NGO in the spirit of Fudenberg and Tiroles’s (Am Econ Rev Pap Proc 74(2):361–366, 1984) classic taxonomy of business strategies. We also consider strategic delegation from NGO supporters to an NGO that has tastes over environmental and business interests different to their own.

Suggested Citation

  • Anthony Heyes & Andreas Marcel Oestreich, 2018. "A theory of social license when regulatory pressure is jointly produced by an EPA and an NGO," Journal of Regulatory Economics, Springer, vol. 54(3), pages 219-243, December.
    • Handle: RePEc:kap:regeco:v:54:y:2018:i:3:d:10.1007_s11149-018-9370-1
    DOI: 10.1007/s11149-018-9370-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11149-018-9370-1
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11149-018-9370-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    3. Jason Walter & Yang-Ming Chang, 2017. "Green certification, heterogeneous producers, and green consumers: a welfare analysis of environmental regulations," Journal of Regulatory Economics, Springer, vol. 52(3), pages 333-361, December.
    4. Anthony Heyes & Steve Martin, 2017. "Social Labeling by Competing NGOs: A Model with Multiple Issues and Entry," Management Science, INFORMS, vol. 63(6), pages 1800-1813, June.
    5. Heyes, Anthony & Rickman, Neil, 1999. "Regulatory dealing - revisiting the Harrington paradox," Journal of Public Economics, Elsevier, vol. 72(3), pages 361-378, June.
    6. Prno, Jason & Scott Slocombe, D., 2012. "Exploring the origins of ‘social license to operate’ in the mining sector: Perspectives from governance and sustainability theories," Resources Policy, Elsevier, vol. 37(3), pages 346-357.
    7. Aldashev, Gani & Verdier, Thierry, 2009. "When NGOs go global: Competition on international markets for development donations," Journal of International Economics, Elsevier, vol. 79(2), pages 198-210, November.
    8. Pargal, Sheoli & Wheeler, David, 1996. "Informal Regulation of Industrial Pollution in Developing Countries: Evidence from Indonesia," Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1314-1327, December.
    9. Lisa Planer-Friedrich & Marco Sahm, 2017. "Strategic Corporate Social Responsibility," CESifo Working Paper Series 6506, CESifo.
    10. Gani Aldashev & Michela Limardi & Thierry Verdier, 2013. "Watchdogs of the Invisible Hand: NGO Monitoring, Corporate Social Responsibility, and Industry Equilibrium," Working Papers 1404, University of Namur, Department of Economics.
    11. Heyes, Anthony G. & Maxwell, John W., 2004. "Private vs. public regulation: political economy of the international environment," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 978-996, September.
    12. Planer-Friedrich, Lisa & Sahm, Marco, 2017. "Strategic corporate social responsibility," BERG Working Paper Series 124, Bamberg University, Bamberg Economic Research Group.
    13. Danny Miller & Jean-Marie Toulouse, 1986. "Chief Executive Personality and Corporate Strategy and Structure in Small Firms," Management Science, INFORMS, vol. 32(11), pages 1389-1409, November.
    14. Heyes, Anthony G., 1996. "Cutting environmental penalties to protect the environment," Journal of Public Economics, Elsevier, vol. 60(2), pages 251-265, May.
    15. Heyes, Anthony & Kapur, Sandeep, 2012. "Community pressure for green behavior," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 427-441.
    16. David P. Baron & Daniel Diermeier, 2007. "Strategic Activism and Nonmarket Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 599-634, September.
    17. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
    18. Heyes, Anthony & Martin, Steve, 2015. "NGO mission design," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 197-210.
    19. repec:wly:soecon:v:83:1:y:2016:p:236-252 is not listed on IDEAS
    20. Badrinath, S G & Bolster, Paul J, 1996. "The Role of Market Forces in EPA Enforcement Activity," Journal of Regulatory Economics, Springer, vol. 10(2), pages 165-181, September.
    21. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, March.
    22. David P. Baron, 2009. "A Positive Theory of Moral Management, Social Pressure, and Corporate Social Performance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 7-43, March.
    23. Harrington, Winston, 1988. "Enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 37(1), pages 29-53, October.
    24. Anthony Heyes (ed.), 2001. "The Law and Economics of the Environment," Books, Edward Elgar Publishing, number 2037.
    25. Kambhu, John, 1989. "Regulatory Standards, Noncompliance and Enforcement," Journal of Regulatory Economics, Springer, vol. 1(2), pages 103-114, June.
    26. John Kambhu, 1989. "Regulatory standards, noncompliance and enforcement," Research Paper 8902, Federal Reserve Bank of New York.
    27. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    28. Langpap, Christian & Shimshack, Jay P., 2010. "Private citizen suits and public enforcement: Substitutes or complements?," Journal of Environmental Economics and Management, Elsevier, vol. 59(3), pages 235-249, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kopel, Michael & Marini, Marco A., 2022. "Mandatory disclosure of managerial contracts in NGOs," Journal of Economic Behavior & Organization, Elsevier, vol. 199(C), pages 65-85.
    2. Espinola-Arredondo, Ana & Stathopoulou, Eleni & Munoz, Felix, 2019. "Regulators and Environmental Groups: Substitutes or Complements?," Working Papers 2019-1, School of Economic Sciences, Washington State University.
    3. Dorothée Brécard, 2023. "How Corporate–NGO Partnerships Affect Eco-Label Adoption and Diffusion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(1), pages 233-261, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anthony Heyes & Marcel Oestreich, 2017. "The Optimal NGO Chief: Strategic Delegation in Social Advocacy," Working Papers 1701, Brock University, Department of Economics.
    2. Luciano Fanti & Domenico Buccella, 2018. "Corporate Social Responsibility and Managerial Bonus Systems," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(2), pages 349-365, July.
    3. Heyes, Anthony & Doucet, Joseph, 1997. "2-Stage Enforcement and Regulatory Polarisation: a Simple Model with Application to the USEPA," Cahiers de recherche 9717, Université Laval - Département d'économique.
    4. Cheng, Chu-Chuan & Lai, Yu-Bong, 2012. "Does a stricter enforcement policy protect the environment? A political economy perspective," Resource and Energy Economics, Elsevier, vol. 34(4), pages 431-441.
    5. Luca Lambertini & Arsen Palestini & Alessandro Tampieri, 2016. "CSR in an Asymmetric Duopoly with Environmental Externality," Southern Economic Journal, John Wiley & Sons, vol. 83(1), pages 236-252, July.
    6. Heyes, Anthony & Lyon, Thomas P. & Martin, Steve, 2018. "Salience games: Private politics when public attention is limited," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 396-410.
    7. Yoshifumi Hino & Yusuke Zennyo, 2017. "Corporate social responsibility and strategic relationships," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 64(3), pages 231-244, September.
    8. Carmen Arguedas, 2008. "To Comply or Not To Comply? Pollution Standard Setting Under Costly Monitoring and Sanctioning," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(2), pages 155-168, October.
    9. Krautheim, Sebastian & Verdier, Thierry, 2016. "Offshoring with endogenous NGO activism," Journal of International Economics, Elsevier, vol. 101(C), pages 22-41.
    10. Poret, Sylvaine, 2019. "Label wars: Competition among NGOs as sustainability standard setters," Journal of Economic Behavior & Organization, Elsevier, vol. 160(C), pages 1-18.
    11. Lisa Planer-Friedrich & Marco Sahm, 2017. "Strategic Corporate Social Responsibility," CESifo Working Paper Series 6506, CESifo.
    12. Steve Martin, 2019. "Moral management in competitive markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 541-560, June.
    13. Lambertini, Luca & Tampieri, Alessandro, 2015. "Incentives, performance and desirability of socially responsible firms in a Cournot oligopoly," Economic Modelling, Elsevier, vol. 50(C), pages 40-48.
    14. Mariana Cunha & Filipa Mota, 2020. "Coordinated Effects of Corporate Social Responsibility," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 617-641, December.
    15. Heyes, Anthony & Kapur, Sandeep, 2012. "Community pressure for green behavior," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 427-441.
    16. Patricia Crifo & Vanina Forget, 2013. "La responsabilité sociale et environnementale des entreprises : mirage ou virage ?," Working Papers hal-00830642, HAL.
    17. Carmen Arguedas & Francisco Cabo & Guiomar Martín-Herrán, 2017. "Optimal Pollution Standards and Non-compliance in a Dynamic Framework," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 537-567, November.
    18. Markus Kitzmueller & Jay Shimshack, 2012. "Economic Perspectives on Corporate Social Responsibility," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 51-84, March.
    19. L. Lambertini & A. Palestini & A. Tampieri, 2014. "CSR in an Asymmetric Duopoly with Environmental Externalities," Working Papers wp959, Dipartimento Scienze Economiche, Universita' di Bologna.
    20. Patricia Crifo & Vanina D. Forget, 2015. "The Economics Of Corporate Social Responsibility: A Firm-Level Perspective Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 112-130, February.

    More about this item

    Keywords

    Environmental regulation; Private politics; Strategic delegation; NGOs; Social license;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:regeco:v:54:y:2018:i:3:d:10.1007_s11149-018-9370-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.