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Does Private Regulation Preempt Public Regulation?

  • NEIL MALHOTRA (a1), BENOÎT MONIN (a1) and MICHAEL TOMZ (a1)
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.

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Corresponding author
*Neil Malhotra, Edith M. Cornell Professor of Political Economy, Stanford Graduate School of Business, Stanford University, neilm@stanford.edu.
Benoît Monin, Bowen H. and Janice Arthur McCoy Professor of Ethics, Psychology, and Leadership, Stanford Graduate School of Business, Stanford University, monin@stanford.edu.
Michael Tomz, Professor of Political Science, Stanford University, Senior Fellow, Stanford Institute for Economic Policy Research, tomz@stanford.edu.
Footnotes
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For extremely helpful comments on earlier versions of this article, we thank the editor, three anonymous reviewers, and participants at the Environmental Politics and Governance Conference (2015 and 2016), the Barcelona-Gothenburg Workshop on Experimental Political Science (2016), the Meetings of the American Political Science Association (2015), and seminar participants at Northwestern University and Yale University. We thank Kriss Deiglmeier for helping us launch this project, and Daniel Kinderman and Aseem Prakash for terrific feedback. Holke Brammer, Nick Eubank, Magali Fassiotto, Victoria Greenen, Sophie Harrison, Hajin Kim, Nathan Lee, and Amanda Zerbe provided valuable research assistance. We thank Liz Pomper and David Yarnold from Audubon for facilitating the study of political activists, and Nathan Lee for assistance with the study of government officials, which served as a pilot for the CivicPulse survey panel (civicpulse.org). We are grateful for generous financial support from the Stanford Woods Institute for the Environment. Replication materials can be found on Dataverse at: https://doi.org/10.7910/DVN/ARIQT2.

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