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Signaling Environmental Stewardship in the Shadow of Weak Governance: The Global Diffusion of ISO 14001
Author(s) -
Berliner Daniel,
Prakash Aseem
Publication year - 2013
Publication title -
law and society review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.867
H-Index - 74
eISSN - 1540-5893
pISSN - 0023-9216
DOI - 10.1111/lasr.12015
Subject(s) - shadow (psychology) , business , corporate governance , environmental stewardship , environmental governance , certification , incentive , stewardship (theology) , accounting , turnover , foreign direct investment , public economics , finance , economics , market economy , environmental resource management , political science , law , management , psychology , politics , psychotherapist , macroeconomics
This article examines how the quality of domestic regulatory institutions shapes the role of global economic networks in the cross‐national diffusion of private or voluntary programs embodying environmental norms and practices. We focus on ISO ( I nternational O rganization for S tandardization) 14001, the most widely adopted voluntary environmental program in the world, which encourages participating firms to adopt environmental stewardship policies beyond the requirement of extant laws. We hypothesize that firms are motivated to signal environmental stewardship via ISO 14001 certification to foreign customers and investors that have embraced this voluntary program, but only when these firms operate in countries with poor regulatory governance. Using a panel of 129 countries from 1997 to 2009, we find that bilateral export and bilateral investment pressures motivate firms to join ISO 14001 only when firms are located in countries with poor regulatory governance, as reflected in corruption levels. Thus, our article highlights how voluntary programs or private law operates in the shadow of public regulation, because the quality of public regulation shapes firms' incentives to join such programs.