The Interplay Between Private and Public Regulations: Evidence from ISO 14001 Adoption Among Chinese Firms

Wenlong He (), Wei Yang () and Seong-jin Choi ()
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Wenlong He: University of International Business and Economics
Wei Yang: University of Texas at Austin
Seong-jin Choi: Hanyang University

Journal of Business Ethics, 2018, vol. 152, issue 2, No 9, 477-497

Abstract: Abstract Extant studies on private regulation have not reached a sufficient understanding about the interplay between private and public regulations, due to underdeveloped theoretical framework and the lack of large-sample empirical investigations. Leveraging ISO 14001 adoption among Chinese firms as the research context, the current research draws on the institutional theory to examine how firm’s adoption of ISO 14001 standard, as a specific form of private regulation, affects the incidence of public environmental inspections. To test our arguments, we conduct two empirical studies. Study 1 uses the first-hand data of a corporate social responsibility survey on Chinese manufacturing firms, whereas Study 2 deploys the second-hand longitudinal archival data of the government environmental inspections on Chinese listed firms. Both of the two studies reveal consistent findings that ISO 14001 adoption decreases the incidence of government environmental inspections, and that the effect of ISO 14001 adoption becomes stronger in state-owned enterprises and firms with top management team’s political ties. Our findings are suggestive of a complementary relationship between private and public regulations, in a sense that private regulations can compensate for the weaknesses of public regulations by offering faster, more flexible and cost-efficient means of enforcement, which allows the public authorities to economize on the deployment of public resources to monitor the rest non-compliant firms.

Keywords: Private regulation; Institutional theory; ISO 14001; Political connections (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s10551-016-3280-x

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