A New Institutional Economics Perspective on Industry Self-Regulation

187 Pages·2012·0.865 MB·English

by  Jan Sammeck (auth.)

Jan Sammeck
A New Institutional Economics Perspective
on Industry Self-Regulation
GABLER RESEARCH
Jan Sammeck

A New Institutional
Economics Perspective
on Industry Self-Regulation

With a foreword by Prof. Dr. Andreas Suchanek
RESEARCH
Bibliographic information published by the Deutsche Nationalbibliothek
The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografi e;
detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.
Doctoral thesis, Handelshochschule Leipzig, 2011

1st Edition 2012
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ISBN 978-3-8349-3541-0
V

Foreword
The idea of self-regulation of an industry is not an entirely new one. But it is mainly due to
the globalization and digitalization of the last ten years or so, that self-regulation in form of
codes of conduct or self-imposed standards and the according initiatives became an important
issue not only in practice but also in Political Science or Economics as well as Business
Ethics.
Surprising as it may sound, there exist until now comparably few studies about the
factors which influence systematically the effectiveness of self-regulation. The basic
problems: defining the appropriate standards and monitoring as well as enforcing them, are
well known, but an integrated research that combines deductive reasoning with the inductive
analysis of real-world examples of this kind of competitors’ cooperation, so to speak, is rarely
done; the work of A. Greif, E. Ostrom and others offers valuable insights on which one can
build, but it is not directly concerned with today’s business self-regulation initiatives.
From a Business Ethicist’s point of view this field is especially interesting, since in the
last years this idea of self-regulation in business has become more popular and some authors
look at it as one of the most promising means to cope with the challenges the global society is
facing today.
Against this optimism and normative expectations, respectively, the study of Jan
Sammeck focuses on the question: “When can a self-regulation initiative be effective in
mitigating unethical practices of firms in an industry?” Put differently: Why should a firm
voluntarily constrain itself in a collective agreement when there are not sufficient incentives
to do so individually?
Using this criterion of incentive-compatibility in a theoretically substantiated way,
Sammeck is able to derive a framework which offers a heuristic to analyze under which
conditions one can expect systematically, that firms will contribute to an effective
implementation of a self-regulation regime.
As a result, Sammeck’s study allows criticizing with strong arguments an often found
assertion, better perhaps: demand in Business Ethics that firms have to accept joint
responsibility for the effective implementation of social and ecological standards. This
demand is sometimes accompanied from the economic argument that there are potential gains
from cooperation through the implementation of appropriate rules. It is an important
VI

contribution to clarify the complex prerequisites which have to be met before the decisive
criterion of incentive compatibility is fulfilled.
On the other hand, Sammeck’s approach allows for a kind of positive research that is
oriented toward improving not only the abstract theoretical, but also practical knowledge how
firms can contribute to higher ethical standards and which conditions should be worked on to
facilitate effective and socially desired self-regulation.
One result that is of specific interest for Business Ethics is Sammeck’s conclusion
about the relevance of individual commitment when it comes to the question how to cope
with the problem of second-order dilemmas. Just because Sammeck emphasizes the criterion
of incentive-compatibility, he is able to offer new arguments how to foster corporate
responsibility effectively by improving the crucial conditions for collective commitment.
Thus, I can strongly recommend everyone who is in one way or another concerned
with the issue of self-regulation in industries to study carefully this book.

Prof. Dr. Andreas Suchanek
VII

Preface
The idea that companies should commit themselves to respect the ethical values of society
and contribute to their institutionalization is more relevant today than ever. In the course of
this debate, the instrument of self-regulation has received considerable prominence and
voluntary industry commitments can be found in almost every sector of the economy.
Against this background, it is necessary to develop a theoretical foundation that shows
– on a general level – what the possible contribution of this instrument to more socially
acceptable industry conduct can be. Based on the theory of new institutional economics, this
study attempts to provide an approach to the fundamental characteristics of self-regulatory
initiatives and how they affect the establishment and institutionalization of ethical values and
industry standards.
The findings of this work do not only offer a taxonomy and methodological approach
for the phenomenon of self-regulation, but also provide insights on the possibilities and
limitations of this instrument.

As the successful completion of such a dissertation is also depending on the
cooperation of others, I would like to thank those who enabled me to accomplish this work.
I wish to express my greatest thanks to my thesis supervisor Prof. Dr. Andreas
Suchanek, who was always available for help and provided me with valuable ideas and hints –
from the development of a research question to the completion of this work.
My thanks also go to Prof. Pierfrancesco La Mura, Ph.D. for being second assessor
and Prof. Dr. Arnis Vilks for assuming chair of the examination committee.
My final thanks go to my parents. Their continuous support contributed a great deal to
the way this project went and enabled me to succesfully bring it to completion. This work is
dedicated to you.

Jan Sammeck
VIII

Vorwort
Die Idee, dass sich Unternehmen auf die Einhaltung von ethischen Werten verpflichten und zu
deren Institutionalisierung beitragen ist heute aktueller denn je. Im Zuge dieser Debatte hat
das Instrument der Selbstregulierung einen erhöhten Stellenwert erlangt und
Selbstverpflichtungen der Industrie sind in kaum einer Branche wegzudenken.
Gerade vor diesem Hintergrund ist es notwendig einen theoretischen Unterbau zu
entwickeln, der auf einer generellen Ebene den möglichen Beitrag dieses Instruments
aufzeigt. Da es der Anspruch der vorliegenden Arbeit ist es einen solchen zu entwickeln, fragt
sie ausgehend von der Theorie der Neuen Institutionenökonomik nach den grundsätzlichen
Charakteristika von Selbstregulierungsinitiativen und wie diese die Etablierung und
Institutionalisierung von ethischen Werten und Branchenstandards beeinflussen.
Im Ergebnis bietet diese Arbeit mit der Strukturierung und Kategorisierung des
Phänomens Selbstregulierung nicht nur einen methodischen Ansatz zur Analyse, sondern birgt
insbesondere auch Einsichten über die Möglichkeiten und Grenzen dieses Instruments.

An dieser Stelle möchte ich den Personen danken, die maßgeblich am erfolgreichen
Abschluss meiner Dissertation beteiligt waren. Mein größter Dank gilt meinem Doktorvater
Prof. Dr. Andreas Suchanek, der von der Entwicklung einer Fragestellung über die inhaltliche
Struktur bis hin zum Abschluss der Arbeit stets mit wertvollen Ideen und Hinweisen zur Seite
stand.
Mein Dank gilt auch Prof. Pierfrancesco La Mura, Ph.D für die Übernahme des
Zweitgutachtens sowie Prof. Dr. Arnis Vilks für die Übernahme des Vorsitzes des
Prüfungsausschusses.
Mein abschließender Dank gilt meinen Eltern. Ohne ihre vielfältige Unterstützung
wäre das Projekt „Dissertation“ in dieser Form für mich nicht möglich gewesen. Ihnen ist
diese Arbeit gewidmet.

Jan Sammeck
IX

Contents
CONTENTS ........................................................................................................ IX(cid:3)
ABBREVIATIONS ............................................................................................. XI(cid:3)
FIGURES ......................................................................................................... XIII(cid:3)
1. INTRODUCTION AND PROBLEM EXPOSITION ...................................... 1(cid:3)
2. A CONCEPT OF DEMAND FOR INDUSTRY SELF-REGULATION ........ 9(cid:3)
2.1 A Definition of Industry Self-Regulation ............................................................................. 9(cid:3)
2.2 Why Firms Self-Regulate: Introduction to Theory ............................................................ 12(cid:3)
2.3 A Transaction Cost Approach to Self-Regulation .............................................................. 16(cid:3)
2.3.1 Transaction Costs in Stakeholder Relations and Individual Commitment .................. 19(cid:3)
2.3.2 Collective Commitment and Strategic Behavior ......................................................... 25(cid:3)
2.4 Creating Credible Commitments ........................................................................................ 37(cid:3)
2.4.1 Self-Regulation Regimes as Institutions ...................................................................... 37(cid:3)
2.4.2 Self-Regulation Regimes as Focal Points .................................................................... 42(cid:3)
2.5 Concluding Remarks .......................................................................................................... 44(cid:3)
3. THE SUPPLY OF INDUSTRY SELF-REGULATION ................................ 47(cid:3)
3.1 The Second-Order Dilemmas of Institutions ..................................................................... 47(cid:3)
3.2 Second-Order Dilemmas in Self-Regulation ...................................................................... 51(cid:3)
3.3 Attributes of Self-Regulation Affecting its Supply ............................................................ 55(cid:3)
3.3.1 Problems of Measurement ........................................................................................... 55(cid:3)
3.3.2 Interdependence in the Production of the Public Good ............................................... 60(cid:3)
3.3.3 Costs of Supply ............................................................................................................ 66(cid:3)
3.3.4 Determining the Value of Attributes: The Institutional Environment ......................... 78(cid:3)
3.4 Concluding Remarks .......................................................................................................... 80(cid:3)
X

4. THE INCORPORATION OF CONCEPT AND CONTEXT ........................ 83(cid:3)
4.1 The Business Social Compliance Initiative of European Apparel Retailers ...................... 85(cid:3)
4.2 The Chemical Industry’s Responsible Care Program ...................................................... 101(cid:3)
4.3 Managing Ethical Values in the Bavarian Construction Industry Association ................ 119(cid:3)
4.4 Concluding Remarks ........................................................................................................ 131(cid:3)
5. IMPLICATIONS OF THE INSTITUTIONAL PERSPECTIVE ................. 133(cid:3)
5.1 The Proposed Analytical Approach ................................................................................. 135(cid:3)
5.2 Reflections on the study ................................................................................................... 138(cid:3)
REFERENCES .................................................................................................. 145(cid:3)