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The Political Economy of Voluntary Regulation: An Empirical Examination of Cross-National Variations in ISO 14001 Adoption

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Type: Working Paper
Author: Prakash, Aseem; Potoski, Matthew
Date: 2002
URI: https://hdl.handle.net/10535/5669
Sector: Theory
Subject(s): political economy
environmental policy
policy analysis
Abstract: "ISO 14001 is an international voluntary environmental code sponsored by the International Organization for Standardization. Firms that join ISO 14001 establish internal management systems that govern the environmental components of their operations. The objective of ISO 14001 is to ensure firms comply with government environmental regulations while encouraging them to go beyond the law's requirements. Although widely touted as beneficial to regulators, firms, and consumers, ISO 14001 adoption rates have varied across countries. This paper examines how country-level factors in firms' political and economic contexts influence firms' incentives to join ISO 14001. Analyses of ISO 14001 adoption rates across 67 countries indicate that firms are more likely to join ISO 14001 when governments flexibly enforce environmental regulations with a less adversarial and litigious stance towards firms, and when consumers want mechanisms for identifying environmentally progressive firms. In appropriate contexts, ISO 14001 provides an important information benefit for firms, regulators and consumers, one that helps each group solve transaction cost problems."

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