Short & Toffel (2010). Making Self-Regulation More Than Merely Symbolic: The Critical Role of the Legal Environment


Jodi L. Short – University of California, Hastings
Michael W. Toffel – Harvard University


Xuege (Cathy) Lu – Cornell University
Bjoern Mitzinneck – Cornell University

Article link:

Your paper addresses the important issue of what can compel firms to follow through on their symbolic commitment to pro-environmental behaviors, leading to actual improvements in compliance to new regulations and environmental outcomes. Focusing on US industrial facilities subject to the Clean Air Act from 1993 to 2003, you argue that regulators’ enforcement activities shape the legal environment which impacts firm’s normative motivation to self-regulate and thus affects whether they actually improve their environmental performance.

Question 1. In particular, you differentiate two types of regulatory pressure: i) regulatory surveillance and ii) the direct threat of punitive sanctions. Interestingly, you hypothesize that these two types of pressures moderate firm’s self-regulatory behaviors differently, despite apparent similarities between the two. Overall you argue (and find empirical support) that surveillance is more effective than the immediate threat of punitive sanctions as the latter risks crowding out normative motivations within organizations to improve. This is one of the many things that we found fascinating with your paper. Can you please walk us through the thought process that led you to this surprising insight? We are especially curious to learn where the idea came from: familiarity with the field, theory, or both?

We examined a government program that encouraged firms to self-regulate by engaging in routine internal auditing and to self-disclose compliance violations discovered during those audits. The act of self-disclosing is meant to inform the regulator that the firm is also routinely auditing, but some might not actually follow through to do so. And so we sought to identify circumstances when self-disclosing firms were more likely to also fulfill their promise to self-police. Early theories of “new governance” and self-regulation stressed the benefits of voluntariness in producing better and more durable organizational compliance. We were somewhat skeptical about compliance in the absence of any coercive pressure, so in this paper we sought to add nuance to the theory by attending to different types of pressures facing firms in their legal environments.

The pressure of routine inspection was one type of pressure we identified. We thought that those firms that were more accustomed to being inspected would be more likely to engage in internal auditing because they believed it would improve their compliance, which inspectors would observe on their next visit. We also thought that, while inspections created compliance pressure for firms, they would not be experienced as particularly coercive because they were routine.

Targeted compliance programs presented a very different type of enforcement pressure. Through interviews and extensive document review, we discovered that the regulator had been sending rather aggressive letters to some firms, notifying them that some aspect of their operations was suspect and practically demanding that they engage in internal auditing and self-disclose any violations they uncovered. We thought that that circumstance wouldn’t likely engender the intrinsic motivation required to conduct serious internal auditing on an ongoing basis, and so we focused on firms that disclosed without receiving such a letter.

Key to our developing these hypotheses is that we took a lot of time to really learn about the program we were studying, including filing several Freedom of Information Act (FOIA) requests to obtain documents written by the regulator and by participating firms, and by conducting interviews with the program manager and inspectors in the field.

Question 2. Your study considered regulatory surveillance pressures that vary by both facility and industry. You find that high surveillance at either of these two levels promotes firms’ self-regulation and environmental improvements. Pushing this a bit further, we were wondering if you also considered, for example, “cumulative effects” of being both directly monitored and in a heavily monitored industry, or potential “spill-over effects” between co-located facilities or facilities noticing monitoring of their peers. More generally, could you share some of the analyses or thought processes behind the paper that may not make it into the final version?

We didn’t consider cumulative effects, but it’s a great idea: we should have! We considered one spillover effect when we theorized that firms in heavily monitored industries would be especially likely to engage in internal auditing once they self-disclosed. This idea is based in general deterrence theory, which holds that inspections of other firms similar to you will lead you to bolster your efforts to comply. But we didn’t look at spillover effects based on geography, which is another great idea. In some of our future work, we’re looking at geographic and other spillover effects. There is a lot learn about spillover effects, and that seems like a very promising research opportunity for organizational and strategy scholars.

Question 3. Closely related is another very interesting aspect of this paper. You elaborated the mechanism(s) underlying firms’ normative motivation to self-regulate, integrating theory on social control and cooperative behavior with the institutional literature on self-regulation. Investigating the behavioral foundations of organizational decision-making under institutional pressures seems to have become a growing research area more generally. What would you say are the key open questions in research on corporate self-regulation and how would you like to see junior scholars use and advance your pioneering work?

One of the most important unresolved theoretical and empirical issues in the symbol vs. substance literature is the relationship between self-regulatory structures and organizational change. The basic question is whether self-regulatory structures are associated with organizational change. There are still surprisingly few studies that explore this question examining the behavior of firms over time, using panel datasets. The next-level questions concern the direction of the relationship between self-regulatory structures and organizational change. Do these structures drive organizational change—and, if so, under what circumstances? Or are these self-regulatory structures merely an artifact of other organizational processes that are actually driving the observed change—in economic terms, are they a credible signal that certain organizations have certain capacities and orientations that are likely to produce the desired change? The answers to these questions are key for developing theory and implementing regulatory programs with voluntary elements.

Question 4. In your paper, you expertly interweave an array of different literatures from institutional and deterrence theories to the organizational literature on social control and cooperation. Hearing in our heads common warnings to not engage in too many conversations in a single paper, do you have practical advice for junior scholars on how to effectively accomplish such literature integration?

One reason why doctoral students might be receiving this warning is to ensure that they gain mastery of particular theoretical domains before undertaking the more challenging task of trying to integrate them. Focusing a paper on a single theoretical framework can also simplify the task of writing a cohesive paper. That said, we believe work that spans theoretical or even disciplinary boundaries has the potential to generate great insights. To produce this kind of work, it is essential to gain a sophisticated grasp of each theoretical strand and to have an overarching theoretical narrative that weaves all of the strands together. We would advise students taking a boundary-spanning approach to pilot test their ideas about theory integration with experts in each of the different fields covered in order to get feedback on the overall plausibility and novelty of the approach. This can be done directly or through targeted conference presentations to different types of audiences. It is important to get this kind of feedback and respond to it as you develop your papers because submitting a field-spanning paper to a journal is likely to draw reviewers from multiple fields. So it’s important to have a preview of what they are likely to say and to preemptively address some of their concerns.

Question 5. As we are talking about advice to junior scholars who are inspired by your paper and would like to learn from its example; do you have any lessons learned from the research or process leading to the publication of this paper? Anything you would you have done differently today?

We learned three big lessons from this project. First, get out into the field to try to understand the intricacies of your empirical context and, for quantitative work, the nuances of how your data are generated. By getting into the weeds of EPA compliance and enforcement policies, we developed ideas about what is interesting about the phenomenon of voluntary disclosure, some of which developed into hypotheses. Second, constantly consider ways to push your work further with extensions. Sometimes these supplemental analyses will land in the paper, sometimes they will be useful for responding to reviewers, and sometimes, if you’re lucky, they will provide you with the germ of a new paper. Our ASQ paper was actually the third in a series of three studies that kept pushing questions further, examining the domain from different perspectives, and considering more nuanced circumstances to identify boundary conditions. Finally, don’t be afraid of big ideas. Taking our first recommendation to get into the weeds of your empirical context can result in a myopic or overly technical approach to the subject matter. Once you really understand what’s going on, zoom out and think about what important theoretical questions your data can help to answer. It can be helpful to seek the counsel of others in this project. It was an early draft review by Jodi’s thesis advisor, Neil Fligstein, that prompted us to consider the theoretical framing we ultimately adopted in our ASQ article.

Question 6. A good number of empirical studies concerning the effectiveness of self-regulatory tools have echoed your insights since the publication of your paper, showing that, compared to command-control or coercive deterrence-based enforcement, the effectiveness of normative motivation is quite limited amongst poor performers. Revisiting this paper today, do you have any thoughts on the most effective methods to compel organizations to follow through on symbolic commitments to changing expectations for their social and environmental performance? Any updated advice for practitioners or suggestions for junior scholars hoping to not only contribute theoretically but also practically relevant insights?

We remain persuaded generally by our findings that some type of institutional pressure is necessary to prompt organizational adherence to voluntary commitments—but that some will be more effective than others, and some might be downright counterproductive. Moreover, not all pressures are available in all institutional contexts. The key for researchers is to move forward in identifying the appropriate types and combinations of pressures that prompt organizational norm adherence in different contexts. There is interesting work to be done identifying alternative sources of pressure in contexts where government regulatory or legal liability pressures are weak. Some of this work is being done in the context of global supply chains. But these questions are becoming more pressing and generally relevant as many traditionally strong bureaucracies are pulling back on enforcement activity, highlighting the limitations of compelled organizational compliance. There is also important work to do to understand the internal organizational drivers of norm adherence. Many of the institutional pressures identified with compliance in the literature are external to organizations, but what would it take to build more compliant organizations from the inside out? Finally, it is essential to learn more about the interaction of various factors known to be associated with adherence to voluntary standards. Coming to firm conclusions about effective interventions requires a deeper understanding of how different factors moderate and mediate one another.

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