Racing to the Bottom? Trade,Environmental Governance,and ISO 14001

Globalization critics argue that international trade spurs a race to the bottom among national environmental standards. ISO 14001 is the most widely adopted voluntary environmental regulation which encourages firms to take environmental action beyond what domestic government regulations require. Drawing on a panel study of 108 countries over seven years, we investigate conditions under which trade linkages can encourage ISO 14001 adoption, thereby countering environmental races to the bottom. We find that trade linkages encourage ISO 14001 adoption if countries' major export markets have adopted this voluntary regulation.     

Information asymmetries as trade barriers: ISO 9000 increases international commerce

Spatial, cultural, and linguistic barriers create information asymmetries between buyers and sellers that impede international trade. The International Organization for Standardization's ISO 9000 program is designed to reduce these information asymmetries by providing assurance about the product quality of firms that receive its certification. Based on analyses of a panel of 140 countries from 1994 to 2004, we find that ISO 9000 certification levels are associated with increases in countries' bilateral exports, particularly for developing countries' exports, which may be due to their more severe quality assurance challenges. © 2009 by the Association for Public Policy Analysis and Management.     

Judicious Incentives: International Public Policy Responses to the Globalization of Environmental Management

Public policymakers and regulators worldwide are grappling with the desire to improve environmental quality through appropriate regulation of business, while also streamlining government. Concurrently, environmentally conscience consumers are calling for improved environmental performance by industry. As a result of these pressures, regulators and lawmakers worldwide are attempting to craft effective policies that create adequate incentives for environmental protection on the part of firms, in the face of decreasing budgets and an increased demand for the use of market‐based incentives. To aid decision makers as they struggle with these concerns, this study provides a detailed case examination of the dilemmas and responses of national‐level regulators as they try to develop appropriate responses to the rise of international and “voluntary” management regimes. To accomplish these goals, this article compares the public policy responses of governments around the world to one such voluntary international environmental regime: ISO 14001. ISO 14001 is a form of industry self‐regulation in response to market forces calling for harmonization in environmental management and as a result of consumer and trade‐partner demands. This study examines the relationships between regulators and the regulated in order to understand if ISO 14001 certified firms are receiving regulatory relief or other forms of public policy/regulatory benefits as a result of their certification. It will also examine the impact that government incentives (or their absence) are having on the certification decisions of firms around the world. This information helps us to begin to understand how the trends toward smaller government and voluntary environmental regimes are affecting one another.     

Voluntary Regulations and Innovation: The Case of ISO 14001

Governments enact environmental regulations to compel firms to internalize pollution externalities. Critics contend that regulations encourage technological lock‐ins and stifle innovation. Challenging this view, the Porter‐Linde hypothesis suggests that appropriately designed regulations can spur innovation because (1) pollution reflects resource waste; (2) regulations focus firms’ attention on waste; and (3) with regulation‐induced focus, firms are incentivized to innovate to reduce waste. This article explores the regulation–innovation linkage in the context of voluntary regulations. The authors focus on ISO 14001, the most widely adopted voluntary environmental program in the world. Examining a panel of 79 countries for the period 1996–2009, they find that country‐level ISO 14001 participation is a significant predictor of a country's environmental patent applications, a standard proxy for innovation activity. The policy implication is that public managers should consider voluntary regulation's second‐order effects on innovation, beyond their first‐order effects on pollution and regulatory compliance.     

Policy Networks,Elections, and State Subsidies1

What are the effects of electoral competition on the disbursement of state subsidies in industrialized democracies? I argue that the scope of subsidies, which ranges from economy‐wide to regional and industry‐specific subsidies, is determined by the extent of political (electoral) monopoly conditioned by economic threats from foreign competition. The mechanism through which electoral competition is linked to subsidies is the policy network. I assess this argument by examining thirteen Organization for Economic Cooperation and Development (OECD) countries in the period 1990–1993. The findings offer amendments to models of policy networks and speak to the importance of domestic institutions on factor mobility and trade policy.     

Focal Points in Public Policy: Evidence from Voluntary Regulation

Numerous studies argue that law affects behavior “expressively”—such as when states create focal points that overcome the coordination difficulties firms face. We argue that governments help firms overcome coordination dilemmas by explicating a preferred strategy for firms weighing investment in voluntary regulation. Firms would prefer to coordinate on a common strategy as a way of reducing the costs of voluntary regulation and increasing its benefits. We test our hypothesis about the efficacy of focal point selection with the European Union's (EU) advocacy of the Eco‐Management and Audit Scheme (EMAS) over a rival environmental management system, International Standards Organization (ISO) 14001. EU nations have statistically significantly lower rates of ISO 14001 certification than comparable countries at least in part due to their advocacy of EMAS. These results emphasize the role the state plays in coordinating business behavior even when such policy is simply expressive.     

The diffusion of environmental management standards in Europe and in the United States: An institutional perspective

ISO 14001, released in 1996, provides the basic framework for the establishment of an Environmental Management System (EMS) that can be audited and certified. ISO is not only an acronym for the International Organization for Standardization, but is also a term that refers to its Greek meaning: equal. The main rationale for the creation of ISO 14001 was that its worldwide acceptance should facilitate international trade by harmonizing otherwise diffuse environmental management standards and by providing an internationally accepted blueprint for sustainable development, pollution prevention, and compliance assurance.However, the implementation of ISO 14001 varies significantly across the globe. A significant number of firms have adopted ISO 14001 in Western Europe and Asia. In December 1999, 52% of the 14,106 ISO 14001 certified facilities were located in Western Europe and 36% in Asia. On the contrary, very few American companies have adopted this voluntary standard. U.S. certified facilities accounted for only 4.5% of the total of ISO 14001 certified facilities in the world in December 1999.The U.S. institutional environment seems acting as a deterrent to ISO 14000 adoption as U.S. companies are fearful of the certification process which lays their performance open to public scrutiny. The opposite is true in Europe, where governments have encouraged the adoption of environmental management standards by setting up a trusted certification system and providing technical assistance to potential adopters.This paper offers a conceptual framework to analyze this variation in adoption rates. It is proposed that the regulatory, normative and cognitive aspects of a country's institutional environment greatly impact the costs and potential benefits of ISO 14001 adoption and therefore explain the differences in adoption across countries. The analysis is supported by data collected from a phone questionnaire to 140 firms in Europe and a questionnaire mailed to 152 firms in the U.S.     

Covenants with weak swords: ISO 14001 and facilities' environmental performance

Voluntary environmental programs are codes of progressive environmental conduct that firms pledge to adopt. This paper investigates whether ISO 14001, a voluntary program with a weak sword—a weak monitoring and sanctioning mechanism—can mitigate shirking and improve participants' environmental performance. Sponsored by the International Organization for Standardization (ISO), ISO 14001 is the most widely adopted voluntary environmental program in the world. Our analysis of over 3,000 facilities regulated as major sources under the U.S. Clean Air Act suggests that ISO 14001‐certified facilities reduce their pollution emissions more than non‐certified facilities. This result persists even after controlling for facilities' emission and regulatory compliance histories as well as addressing potential endogeneity issues between facilities' environmental performance and their decisions to join ISO 14001. © 2005 by the Association for Public Policy Analysis and Management     

Trade-based adoption of voluntary environmental programs in the developing world: Racing to the top or stuck in the mud?

Scholars have consistently found that firms in developing countries adopt voluntary environmental programs (VEPs) in high numbers when their major trade partners are home to many VEP-certified firms. This reflects the following dynamic: Importers based in countries with many VEP-certified facilities demand similarly sustainable production processes from trade partners, and so exporting firms in partner countries adopt VEPs to signal their sustainable practices. Studies have identified characteristics of developing countries that make local exporting firms more likely to adopt VEPs as a signal; however, there has been little analysis as to the country-level characteristics that make importers more (or less) likely to demand VEPs from suppliers abroad, beyond having many VEP-certified firms themselves. This study considers this matter, theorizing that VEP diffusion only accompanies exporting to countries with high levels of income and education, as well as a high number of VEP-certified firms. Panel data analysis provides support for the theory, showing that developing countries only experience trade-based diffusion of ISO 14001 (a widely adopted VEP) through their exports to countries with high income and/or education levels. In contrast, exporting to countries that lack these characteristics creates no such diffusion, even where importing countries’ VEP certification levels are high. Instead, such trade produces a “stuck in the mud” effect, as developing countries’ certification levels stagnate even as those of their import partners rise.     

The nonprofit advantage: Producing quality in thick and thin child care markets

Nonprofit child care centers are frequently observed to produce child care which is, on average, of higher quality than care provided in commercial child care centers. In part, this nonprofit advantage is due to different input choices made by nonprofit centers—lower child‐staff ratios, better‐educated staff and directors, higher rates of professional development for staff. Nonprofit centers may have an additional productivity advantage, due to unmeasured staff motivation and abilities or to better management of the production of good‐quality child care. However, where nonprofit and for‐profit child care firms compete in the same local markets, we speculate that this extra advantage should only appear where demand is sufficiently “thick” to permit a quality differentiation strategy to be financially viable for nonprofits. We estimate the effect of nonprofit status on quality, controlling for differences in financial resources available to the center, differences in the clientele served, and differences in staff and center inputs. In this conventional examination, nonprofit status has a moderately positive impact on quality. However, when we account for the unobserved heterogeneity and separate markets into “thick” and “thin,” a particularly strong nonprofit advantage is found in thick markets, but no productivity advantage for nonprofits is found in thin markets. This finding suggests a clear role for nonprofit organizations in improving the cost‐quality trade‐off faced by parents, but also identifies the market conditions that affect the ability of nonprofit managers to employ this advantage. © 2009 by the Association for Public Policy Analysis and Management.     

Competition and service quality: Evidence from Swedish residential care homes

Against a backdrop of increased levels of marketization of welfare services in OECD countries, this article aims to shed light on the separate effects of private ownership and competition for the market on service quality. Using residential elder care homes in Sweden as our case, we leverage unique panel data of ownership and competition against a set of indicators, pertaining to the structure, process, and outcome dimensions of care quality. The main finding of our analyses is that competition for the market does surprisingly little for quality: private entrepreneurs perform neither better nor worse under stiff competition and the quality of care is approximately the same in those nursing homes that are exposed to the market as in those that are not.     

Globalization,International Organizations,and Telecommunications

Since the 1990s over 158 countries established pro‐market reforms in telecommunications—a fast pace for such a drastic change. For example, Sweden and Botswana, two nations vastly different across multiple dimensions, both liberalized their telecom sectors. Why did so many countries adopt liberal reforms in such a short period of time? Conventional wisdom highlights the role of global markets and technology, powerful states, global diffusion, and domestic politics. I argue that contrary to these claims, diffusion through key international organizations is the critical and overlooked factor in explaining rapid global convergence of pro‐market telecom reforms. Using an original dataset for 189 countries between 1970 and 2003 and event history analysis, I demonstrate that membership in key liberal trading organizations, especially the WTO and the OECD, increases the likelihood that countries will adopt liberal pro‐market reforms in telecommunications. These results speak directly to current public policy debates about the reregulation of global markets and bridges the literatures of policy diffusion, institutional design, and regulatory regimes.     

Partisan Politics,Globalization, and the Determinants of Privatization Proceeds in Advanced Democracies (1990–2000)

The 1990s have witnessed unprecedented attempts at privatizing state‐owned enterprises in virtually all OECD democracies. This contribution analyzes the extent to which the partisan control of the government can account for the differences in the privatization proceeds raised by EU and OECD countries between 1990 and 2000. It turns out that privatizations are part of a process of economic liberalization in previously highly regulated economies as well as a reaction to the fiscal policy challenges imposed by European integration and the globalization of financial markets. Partisan differences only emerge if economic problems are moderate, while intense economic, particularly fiscal, problems foreclose differing partisan strategies.     

Assessing a voluntary environmental initiative in the developing world: The Costa Rican Certification for Sustainable Tourism

The public policy literature has paid little attention to evaluating the ability of voluntary environmental programs to generate economic benefits for firms. Yet, given their voluntary nature, provision of economic benefits to firms is a necessary condition for these programs to become effective environmental policy instruments. Additionally, little is known about why firms operating in developing countries would participate in these initiatives.This paper provides some of the first cross-sectional empirical evidence about voluntary environmental programs established in developing countries. Specifically, the paper focuses on studying hotel participation in the Costa Rican Certification for Sustainable Tourism (CST program). The CST program is probably the first performance-based voluntary environmental program created by a developing country government. Results indicate that hotels with certified superior environmental performance show a positive relationship with differentiation advantages that yield price premiums. Participation in the CST program alone is not significantly related to higher prices and higher sales. The evidence also indicates that participation in the CST program was significantly related to government monitoring, trade association membership and hotels focus on green consumers.     

Managing business political activities in the USA: bridging between theory and practice — another look

This paper provides a review and reflection of Gerry Keim's fine paper on managing US business political activities (BPA). It begins by setting the larger context in which BPA is both practised and studied. It critiques the concept of market‐based competition and extends it by suggesting that non‐market competition can take on a myriad of forms dependent on strategy and structural considerations, among other things. It also provides some sober reminders about the nature of difficulties encountered between academics and practitioners in bridging the gaps of understanding between these constituencies. It also looks at the nature of ‘buyers’ and ‘sellers’ in the public policy marketplace and expands upon the nature of the products being exchanged. Lastly, the paper reviews the nature of strategy and competitive advantage in the non‐market environment and recommends a practitioner focus on innovation and the acquiring of the resources needed for institutionalizing it in their public affairs and BPA efforts for achieving non‐market success. Copyright © 2001 Henry Stewart Publications     

Out of tune or well tempered? How competition agencies direct the orchestrating state

This article analyzes the impact competition agencies have on the orchestrating role of states in domestic private regulation. I argue that these agencies can significantly affect interactions in the governance triangle through the way they apply a “logic of the market” to evaluate agreements between firms. The regulatory framework of European Union competition law has increasingly constrained the ability of firms to take into account broader interests when making agreements to foster social objectives. This logic of the market clashes with the ever‐increasing emphasis governments place on enabling firms to enter into such agreements. I analyze this tension through a case study of a pact of Dutch retailers to collectively introduce higher animal welfare standards for poultry. Using regulatory network analysis I trace the governance interactions between the governance triangle on the one hand (government, non‐governmental organizations, and firms), and the Dutch competition authority, Autoriteit Consument en Markt (ACM) and the European Commission on the other hand. Attempts by the Dutch government to instruct the ACM to be more lenient toward private regulation were blocked twice by the European Commission. As a result, the Dutch government abandoned private regulation as the preferred mode and proposed a bottom‐up process that would generate public regulation as a way to avoid conflict with competition policy. I argue that paradoxically enough the intervention of these non‐majoritarian competition agencies against the “will” of the governance triangle has potentially increased the effectiveness and legitimacy of orchestration processes.     

From norms to programs: The United Nations Global Compact and global governance

Norms shape policy when they get translated into concrete programs. What if a widely shared norm gets translated into a weak program? How might this influence the program's legitimacy? We examine these issues in the context of the United Nations Global Compact, a voluntary program that embodies the widely shared norm of corporate responsibility. While both international intergovernmental organization (IGO) and international non‐governmental organization (INGO) networks support this norm, they differ on the adequacy of the Compact's program design. We explore how this tension affects the diffusion of the Compact across countries, which vary in their levels of embeddedness in IGO and INGO networks. Our findings suggest that embeddedness in IGO networks encourages adoption, while embeddedness in INGO networks discourages it. Our analysis provides important lessons for sponsors of voluntary governance mechanisms. Widespread support for a norm does not automatically ensure support for a program that claims to embody it.     

The container security initiative costs,implications and relevance to developing countries

Following 9/11, the Department of Homeland Security established the Container Security Initiative (CSI) programme in 2002 in response to the threat from terrorist attacks involving weapons of mass destruction transported by cargo containers. This project establishes the tracking and targeting of ‘high risk’ containers and their subsequent scanning with X‐ray machines before loading onto the U.S. bound ships. To date, 44 of the world's largest ports have agreed to become CSI‐compliant, the majority of which are located in industrialised countries, while developing and least developed countries are under‐represented. CSI‐eligibility requires that ports represent a considerable volume of U.S. bound container traffic and invest in container scanning devices. Every non‐intrusive inspecting device (NII) costs several million dollars while investments in IT and existing infrastructure often triple the compliance costs. Containers originating in a CSI port are expedited through U.S. customs, representing a comparative trade barrier for exporters from non‐CSI ports. Thus, CSI acts as a tool for the U.S. to improve security, while representing a challenge to exporting countries' market access. This article provides an evaluation of the impacts this plan will have on the export competitiveness of developing countries. It reviews the potential benefits this programme offers in terms of improved trade facilitation, as well as proposing recommendations for its expansion to include developing countries. Copyright © 2006 John Wiley & Sons, Ltd.     

Regulation by Reputation: Monitoring and Sanctioning in Nonprofit Accountability Clubs

Nonprofits seek to enhance their reputation for responsible management by joining voluntary regulation mechanisms such as accountability clubs. Because external stakeholders cannot fully observe nonprofits’ compliance with club obligations, clubs incorporate mechanisms to monitor compliance and impose sanctions. Yet including monitoring and sanctioning mechanisms increases the cost of club membership for nonprofits. What factors account for the variation in the strength of monitoring and sanctioning mechanisms in voluntary accountability clubs? An analysis of 224 clubs suggests that stringent monitoring and sanctioning mechanisms are more likely in fund‐raising‐focused clubs, clubs that offer certification (as opposed to only outlining a code of conduct), and clubs with greater longevity. The macro context in which clubs function also shapes their institutional design: clubs in OECD countries and clubs with global membership are less likely to incorporate monitoring and sanctioning mechanisms than clubs in non‐OECD countries and single‐country clubs, respectively.     

Is there anything Left? The politics of social spending in new democracies

The evolution of public social expenditures displays divergent patterns across non‐western countries. This exploratory article argues that in order to understand the domestic sources of this divergence, institutional and structural explanations should be complemented with an actor‐oriented perspective. Analyses of the role of party politics in non‐OECD democracies, through multivariate fixed‐effect regressions using data from 46 countries between 1995 and 2015, reveals a robust positive association between shifts towards Left party government and increases in total public social expenditures, also when controlling for structural and institutional factors. This association however seems potentially conditional on sufficient levels of economic growth. While indicating an impact of partisanship, further research is arguably needed regarding the origins, organization and policy outputs of parties in more recently democratized countries, as well as regarding the conditions under which the ideological orientation of parties in government are actually consequential.