Regulatory Errors with Endogenous Agendas

How do a regulator's decisions depend on the characteristics and strategies of its external clients? We develop a theory of approval regulation in which an uninformed regulator may veto the submission of a better‐informed firm. The firm can perform publicly observable experiments to generate product information prior to submission. We find that when experimentation is short, Type I errors (approving bad products) are more likely for products submitted by firms with lower experimentation costs (larger firms), while Type II errors (rejecting good products) should be concentrated among smaller firms. These comparative statics are reversed when experimentation is long. We perform a statistical analysis on FDA approvals of new pharmaceutical products using two different measures of Type I error. We find consistent support for the counterintuitive hypothesis that, under particular conditions, errors are decreasing in the size of the firm submitting the product.     

Regulatory enforcement against organizational insiders: Interactions in the pursuit of individual accountability

The UK Financial Conduct Authority has developed and implemented policies targeting individuals for regulatory non-compliance in the post-2008 crisis period. This article develops a tripartite framework that differentiates between individual–firm, regulator–individual, and regulator–firm interactions to capture the complexity of these enforcement proceedings. Drawing on interviews with stakeholders, administrative decisionmaking observations, and documentary analysis, it outlines the process of individualizing responsibility for non-compliance and finds that this approach poses evidential and investigative challenges for the regulator as a result of individual and corporate responses. The evidence shows that individuals are more likely than firms to engage in an adversarial response to an investigation rather than to settle. At the same time, through an inverse process of “corporatization” of the enforcement proceedings, firms may employ resources and strategies aimed at obscuring individual responsibility or binding together more closely the corporate and the individual case. The article concludes that the prospects of a successful outcome in investigating individuals depend not only on regulators' activities but also on corporate responses and on which managers are considered assets to the firm and which may be thrown to the wolves.     

Signaling Government Financial Reporting Quality to Credit Analysts

The quality of governmental financial reporting and auditing is of continuing concern to oversight bodies and to those interested in the financial accountability of governments. While governments may have operational incentives to improve financial reporting, external incentives depend on external users' ability to distinguish cities with better reporting practices from those with inferior systems. Two methods that cities with better systems may use to distinguish themselves are the GFOA's Certificate of Excellence for Financial Reporting and through the reputation of the audit firm. This article examines whether the degree of reliance that bond raters place on accounting data is influenced by the Certificate and by the type of auditor. In addition, since inadequate fees have been cited as a possible cause of substandard audits, we examine the trend in audit fees for cities for the period 1985–1989. The findings suggest that the use of a Big Eight audit firm does increase the reliance placed on cities' financial statement numbers but there is only weak evidence that the Certificate has a similar effect. In addition we find evidence of a significant decline in audit fees for the period 1985–1989.     

Mixed evidence for a relationship of cognitive fatigue to political engagement

Daily cognitive fatigue is widespread, yet we are still learning about its influence on political behavior. Existing research suggests fatigue will reduce consumption of politics at the margin. Moreover, when fatigued individuals do engage with political material, they should be more likely to choose content and decision rules that require minimal effort. We find mixed empirical evidence for these claims. In observational data, we find a negative relationship between fatigue and engagement, on average, but the coefficients are typically small and statistically insignificant and we find substantial variation across different measures of fatigue. In three experiments, we find mixed evidence that manipulated fatigue reduces the demand for political content over sports and other non-political entertainment. In a fourth experiment, we find no evidence that manipulated fatigue shapes heuristic versus systematic processing. We discuss the limitations of our study, its relationship to existing work, and avenues for future research.     

The Real Winner's Curse

Traditional theories of democracy suggest that political representation of excluded groups can reduce their incentives to engage in conflict and lead to lower violence. However, this argument ignores the response of established elites when (1) their interests are threatened by the policy stance of new political actors and (2) elites have a comparative advantage in the exercise of violence. Using a regression discontinuity approach, we show that the narrow election of previously excluded left‐wing parties to local executive office in Colombia results in a one standard deviation increase in violent events by right‐wing paramilitaries. We interpret this surge in violence as a reaction of traditional elites to offset the increase in outsiders' access to formal political power. Consistent with this interpretation, we find that violence by left‐wing guerrillas and other actors is unaffected and that violence is not influenced by the victory of right‐wing or other new parties in close elections.     

Does group engagement with members constitute a “beneficial inefficiency”?

This article explores the role of variations in organizational form in explaining levels of group access. Specifically, we test whether group forms incorporating more extensive engagement with members receive policy advantages. We develop and test a account of beneficial inefficiencies. Our account reasons that the costs of inefficient intraorganizational processes and practices associated with enhanced engagement with members are beneficial as they generate crucial “access goods”—specifically encompassing positions—that in turn receive enhanced policy benefits. The costs of intraorganizational practices allowing members to engage more thoroughly in decision making are thus beneficial inefficiencies. We test this proposition using data on the Australian interest group system. Using the tools of cluster analysis, we identify three forms, each varying in respect of the inefficiencies they embody. Our multivariate analysis finds strong support for the account of beneficial inefficiencies: groups with the most inefficient organizational model receiving the greatest policy access.     

Creating Constituencies: Presidential Campaigns, the Scope of Conflict, and Selective Mobilization

We investigate how material and symbolic campaign appeals may motivate segments of the electorate to be more engaged with the unfolding presidential campaign; this engagement is a first step toward bringing these populations into an electoral coalition. We pair two massive new data collections—the National Annenberg Election Study capturing public opinion across an entire campaign and The Wisconsin Advertising Project recording and cataloging the political commercials aired by campaigns—to examine how the candidates’ choice of issues affects who gets into the game. We find evidence that appeals to symbolic interests are more likely than appeals to material interest to selectively engage targeted groups.     

Stakeholder engagement as communication design practice

Stakeholder engagement competence is here framed as an ongoing matter of communication design—that is, professionals and organizations of all sorts are challenged to invent forms of engagement with organizational stakeholders making communication possible that may otherwise be difficult, impossible, or unimagined. An original framework for articulating logics of communication design that addresses extant shortcomings in understanding stakeholder engagement competence is introduced. The framework draws into relief how communication for stakeholder engagement is conceptualized and valued by professionals and organizations. The communication design practice framework provides a path for opening up the black box of stakeholder engagement to advance communication competence in professional practice and organizational communication. The framework is illustrated by reconstructing, from current corporate social responsibility practice, two competing communication design logics for constructing dialogue and stakeholder engagement. One logic, grounded in the shared value framework, reprises a common theme about business that points to constructing communication to maintain the primacy of shareholders in stakeholder networks and to seek profitability in social, environmental, and economic problems. The other logic introduces an alternative communication design logic grounded in commitments to collaborative governance and open innovation. This logic is for stakeholder networks to generate and manage multiple values that address matters of social, cultural, environmental, and economic concerns. We then consider some key implications for engagement practice and competency for inventing forms of dialogue and stakeholder engagement to create value in the new globalized, mediated context. Communication design practice opens new ways of thinking about stakeholder engagement that has implications for cultivating professional practice and improving organizational decision‐making about investing in communication resources and infrastructure. Copyright © 2015 John Wiley & Sons, Ltd.     

Politics,unemployment, and the enforcement of immigration law

Immigration control-related audits and their resulting sanctions are not solely determined by impartial enforcement of laws and regulations. They are also determined by the incentives faced by vote-maximizing politicians, agents acting on their behalf, and workers likely to compete with immigrants in the local labor market. In this paper, we use a unique data set to test the extent to which congressional oversight determines the bureaucratic immigration enforcement process. We examine the decisions made at each stage of enforcement from over 40,000 audits from 1990 to 2000. This includes analysis of (1) whether a firm is found in violation, (2) whether a fine is issued, (3) the size of the fine issued, and (4) how much of a dollar reduction fined employers were able to negotiate. We find that the number of audits conducted increases with local unemployment. We also find that a congressman’s party affiliation and its interaction with committee membership and party majority status, as well as firm size and local union membership, correlate to decisions made at every stage of enforcement.     

The impact of online media on stakeholder engagement and the governance of corporations

Online tools such as social media provide new opportunities for citizens and stakeholder groups to be informed, identify common interests, express and share opinions and demands, organize, and coordinate interventions. Therefore, the Internet could be expected to increase stakeholder engagement in corporate affairs and facilitate good governance. In order to provide an overview of current findings on the impact of online media on governance and stakeholder engagement, we conduct a systematic literature review. Our analysis reveals five topical categories of inquiry. We analyze studies from the field of business participation and find a strong bias towards consumer engagement and marketing issues. Only few studies are found to critically explore the effect of online media on power and value distribution between corporations and stakeholders. We then turn to the more established field of political and civic participation in order to further analyze antecedents, forms, and outcomes of online engagement in civic affairs, and derive a framework for future research. Copyright © 2014 John Wiley & Sons, Ltd.     

Managerial Ambivalence and Electronic Civic Engagement: The Role of Public Manager Beliefs and Perceived Needs

This article addresses an important yet often neglected component of electronic civic engagement efforts: managerial ambivalence about public participation. We examine how managers’ beliefs about public participation and their perceived needs for participation in agency decision making work together to shape electronic engagement efforts. Based on observational data collected in 2010 and 2014 and data from a 2014 survey of managers in 500 U.S. municipal governments, we find that managerial beliefs about participation and their perceived needs for participation are two valid and separate constructs. There is a positive relationship between managerial beliefs and electronic engagement. Perceived needs for participation interact with managers’ beliefs to affect electronic civic engagement. A high level of perceived needs for participation reinforces the effect of managerial beliefs on electronic engagement efforts, but a low level does not offset the effect of managerial beliefs on electronic engagement.     

Centripetal and Centrifugal Incentives under Different Electoral Systems

In a seminal article, Cox (1990) suggested that electoral systems with larger district magnitudes provide incentives for parties to advocate more extreme policy positions. In this article, we put this proposition to the test. Informed by recent advances in spatial models of party competition, we introduce a design that embeds the effect of electoral rules in the utility function of voters. We then estimate the equilibrium location of parties as the weight voters attach to the expected distribution of seats and votes changes. Our model predicts that electoral rules affect large and small parties in different ways. We find centripetal effects only for parties that are favorably biased by electoral rules. By contrast, smaller parties see their vote share decline and are pushed toward more extreme equilibrium positions. Evidence from 13 parliamentary democracies supports model predictions. Along with testing the incentives provided by electoral rules, results carry implications for the strategies of vote‐maximizing parties and for the role of small parties in multiparty competition.     

Stakeholder engagement for value-based banking: The case of Malaysian Islamic banks

This study explores the practices of stakeholder engagement (SE) in Malaysian Islamic banks. In 2017, Bank Negara Malaysia (BNM) introduced the Value-Based Intermediation (VBI) framework, with the aim of promoting a more sustainable and responsible banking system in the country. Among others, the VBI framework requires Islamic banks to adopt a stakeholder-driven approach to their business operations, which involves understanding and responding to the needs and expectations of their stakeholders. Within this context, we apply a content analysis of the annual and sustainability reports of all stand-alone Islamic banks in Malaysia to document the changes in the banks' quality of SE after the introduction of the VBI. The content analysis is guided by a new index that we construct, termed as the Stakeholder Engagement Quality Index (SEQI), which covers four dimensions of SE process: the purpose, stakeholder mapping, scope and approach to the engagement. Our results indicate that the SE quality significantly increases overall and for the third (i.e., scope of SE) and fourth (i.e., SE approach) dimensions subsequent to the VBI. Additionally, in terms of bank types, we find that the SEQI score is higher for commercial Islamic banks than development Islamic banks in the post-VBI period. Despite such improvements, our study alerts policymakers that there are areas that need further attention. Among others, these include integrating SE into the banks' internal managerial functions and encouraging active stakeholder participation in the design and implementation of the engagement itself.     

The Political Costs of Crisis Bargaining: Presidential Rhetoric and the Role of Party

We analyze the first large‐scale, randomized experiment to measure presidential approval levels at all outcomes of a canonical international crisis‐bargaining model, thereby avoiding problems of strategic selection in evaluating presidential incentives. We find support for several assumptions made in the crisis‐bargaining literature, including that a concession from a foreign state leads to higher approval levels than other outcomes, that the magnitudes of audience costs are under presidential control prior to the initiation of hostilities, and that these costs can be made so large that presidents have incentive to fight wars they will not win. Thus, the credibility of democratic threats can be made extremely high. We also find, however, that partisan cues strongly condition presidential incentives. Party elites have incentives to behave according to type in Congress and contrary to type in the Oval Office, and Democratic presidents sometimes have incentives to fight wars they will not win.     

Building the firm's political (lobbying) strategy

• In this paper, we present a framework for building a firm's issue‐specific lobbying strategy. We argue that there are five critical elements of a lobbying strategy and that the major choices concerning political lobbying strategy relate to these elements. The five elements, and the primary strategic choices concerning these elements are: (1) the choice of the level and type of inclusiveness of the strategy; (2) the choice of the form, or forms, of argument to be used in persuading relevant target constituencies; (3) the choice of jurisdictional venue to be addressed; (4) the choice of organizational target that will be engaged and (5) the choice of delivery mode—that is, whether political strategies should be implemented directly by firm managers or outsourced to professional suppliers of these services. We explain these elements in detail. However, in order to engage in a lobbying strategy on a specific issue, the firm must first be able to identify relevant government actions and understand their profitability impact. We show how the strategic logic can be generated by an augmented version of Porter's ‘five forces’ (5F) model (Porter, 1980 ) that explicitly recognizes the role of government—‘six forces’ analysis.

Copyright © 2005 John Wiley & Sons, Ltd.     

Women Don't Run? Election Aversion and Candidate Entry

To study gender differences in candidate emergence, we conduct a laboratory experiment in which we control the incentives potential candidates face, manipulate features of the electoral environment, and measure beliefs and preferences. We find that men and women are equally likely to volunteer when the representative is chosen randomly, but that women are less likely to become candidates when the representative is chosen by an election. This difference does not arise from disparities in abilities, risk aversion, or beliefs, but rather from the specific competitive and strategic context of campaigns and elections. Thus, we find evidence that women are election averse, whereas men are not. Election aversion persists with variations in the electoral environment, disappearing only when campaigns are both costless and completely truthful.     

Benefiting from Public Sector Innovation: The Moderating Role of Customer and Learning Orientation

This article examines whether the payoff from engaging in innovation‐generating activities is contingent on an organization's level of customer and learning orientation. The authors suggest that innovative activity is associated with higher public service quality when the level of customer and learning orientation within the focal organization is high. They test this hypothesis by drawing on a novel panel data set covering all public nonspecialist hospital organizations in England. Using dynamic panel data estimation techniques, the authors find strong support for a direct relationship between innovative activity and public service quality and for a moderating role of both customer and learning orientation. These findings call for a contingency perspective on public sector innovation and highlight some of the boundary conditions that need to be in place if public service organizations are to benefit fully from their innovative activities.     

Dialogue in American Political Campaigns? An Examination of Issue Convergence in Candidate Television Advertising

The theory of issue ownership holds that competing candidates should avoid discussing many of the same issues during a campaign. In contrast, theories of democracy suggest that competitive elections are the mechanism by which the public can hold politicians accountable. To determine the extent to which each theory depicts current campaigns, we develop a new measure of "issue convergence" and test whether or not issue convergence increases as the competitiveness of the race increases. Using new data based upon television advertising aired in U.S. Senate campaigns from 1998 through 2002, we find that issue engagement or dialogue occurs more frequently than indicated by previous research. We also find that issue engagement increases with the competitiveness of the race but that issue engagement decreases as the gap in financial resources between candidates increases.     

Corporate values of the 25 largest European banks: Exploring the ambiguous link with corporate scandals

Corporate value statements communicate what a firm aspires for and what drives their value creation. In addition, corporate values often also define which behaviors are acceptable and which are not. Ideally, corporate values are representations of a firm's informal corporate values and organizational culture. However, in practice, there is an inherent tension between the aspirations and actual values and ensuing behaviors of and within a firm—let alone the potentially different interpretations of abstract corporate value statements. In this paper, we set out to provide more clarity on what corporate values are, how they are inherently ambiguous, and how in practice they compare to firm involvement in scandals. For this purpose, we study the corporate values of the 25 largest European banks after the financial crisis. “Integrity” appeared to be the most common value among the 25 banks, followed by “customer focus.” Nonetheless, over the past 6 years, 15 out of the 25 studied banks were involved in one or more scandals. Scandals can be systematic or caused by rogue employees, and benefitting the firm or their customers—in the latter case, providing an interesting interpretation of the customer focus value. Additionally, we found that courage or its synonyms were barely mentioned among banks' corporate values, potentially providing an additional explanation for the fast size of the financial crisis. Finally, we found that banks that had inclusive social principles such as respect, solidarity, and equality did not face large-scale scandals.     

The Three Exit, Three Voice and Loyalty Framework: A Test with Survey Data on Local Services

The article presents a modified Hirschman framework with three types of exit: moving location; moving from the public to a private sector provider; and moving between public sector providers; and three types of voice: private voice (complaining about private goods); voting; and collective action. Seven hypotheses are generated from this framework. The article then presents evidence from the first round of an online survey examining citizen satisfaction with public services and the relationship between exit and voice opportunities. We find dissatisfied people are more likely to complain privately, vote and engage in other forms of collective participation; but only a weak relationship exists between dissatisfaction and geographical exit. We find some evidence that the exit–voice trade-off might exist as more alert consumers are more likely to move from the public to the private sector and those 'locked in' are more likely to complain than those who have outside options. Overall the results tend to corroborate the hypotheses drawn from the modified Hirschman framework.