Person:

Toffel, Michael

We measure the impact of municipal policies requiring governments to construct green buildings on private-sector adoption of the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) standard. Using matching methods, panel data, and instrumental variables, we find that government procurement rules produce spillover effects that stimulate both private-sector adoption of the LEED standard and supplier investments in green building expertise. Our findings suggest that government procurement policies can accelerate the diffusion of new environmental standards that require coordinated complementary investments by various types of private adopter.

Competition among firms yields many benefits but can also encourage firms to engage in corrupt or unethical activities. We argue that competition can lead organizations to provide services that customers demand but that violate government regulations, especially when price competition is restricted. Using 28 million vehicle emissions tests from more than 11,000 facilities, we show that increased competition is associated with greater inspection leniency, a service quality attribute that customers value but is illegal and socially costly. Firms with more competitors pass customer vehicles at higher rates and are more likely to lose customers whom they fail, suggesting that competition intensifies pressure on facilities to provide illegal leniency. We also show that, at least in markets in which pricing is restricted, firms use corrupt and unethical practices as an entry strategy.

Suppliers are increasingly being asked to share information about their vulnerability to climate change and their strategies to reduce greenhouse gas emissions. Their responses vary widely. We theorize and empirically identify several factors associated with suppliers being especially willing to share this information with buyers, focusing on attributes of the buyers seeking this information and of the suppliers being asked to provide it. We test our hypotheses using data from the Carbon Disclosure Project's Supply Chain Program, a collaboration of multinational corporations requesting such information from thousands of suppliers in 49 countries. We find evidence that suppliers are more likely to share this information when requests from buyers are more prevalent, when buyers appear committed to using the information, when suppliers belong to more profitable industries, and when suppliers are located in countries with greenhouse gas regulations. We find evidence that these factors also influence the comprehensiveness of the information suppliers share and their willingness to share the information publicly.

Transnational business regulation is increasingly implemented through private voluntary programs—like certification regimes and codes of conduct—that diffuse global standards. But little is known about the conditions under which companies adhere to these standards. We conduct one of the first large-scale comparative studies to determine which international, domestic, civil society, and market institutions promote supply chain factories' adherence to the global labor standards embodied in codes of conduct imposed by multinational buyers. We find that suppliers are more likely to adhere when they are embedded in states that participate actively in the ILO treaty regime and that have stringent domestic labor law and high levels of press freedom. We further demonstrate that suppliers perform better when they serve buyers located in countries where consumers are wealthy and socially conscious. Taken together, these findings suggest the importance of overlapping state, civil society, and market governance regimes to meaningful transnational regulation.

In response to stakeholders’ growing concerns, firms are joining self-regulatory environmental programs to signal their superior environmental management capabilities. In contrast to the literature’s focus on programs featuring third-party certification, we theorize that programs lacking certification can nonetheless sometimes serve as credible signals by instead promoting civil society scrutiny, thus mitigating adverse selection. We hypothesize that (a) institutional environments that support civil society scrutiny and (b) organizational characteristics that increase the impact of that scrutiny enhance the credibility of the signal by making participation more costly for firms with inferior capabilities. Our theory is supported by examining the decisions by 2,604 firms in 44 countries whether to participate in the United Nations Global Compact.

Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers' conduct. But little is known about what influences auditors' ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains. Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers’ conduct. But little is known about what influences auditors’ ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains.

We study how government green procurement policies influence private-sector demand for similar products. Specifically, we measure the impact of municipal policies requiring governments to construct green buildings on private-sector adoption of the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) standard. Using matching methods, panel data, and instrumental variables, we find that government procurement rules produce spillover effects that stimulate both private-sector adoption of the LEED standard and investments in green building expertise by local suppliers. These findings suggest that government procurement policies can accelerate the diffusion of new environmental standards, which require coordinated complementary investments by various types of private adopter.

This article seeks to encourage scholars to conduct research that is more relevant to the decisions faced by managers and policymakers. I define relevant research papers as those whose research questions address problems found (or potentially found) in practice and whose hypotheses connect independent variables within the control of practitioners to outcomes they care about using logic they view as feasible. I provide several suggestions for how scholars can enhance research relevance, including engaging practitioners in on-campus encounters, at managerial conferences, and at crossover workshops; conducting site visits and practitioner interviews; working as a practitioner; and developing a practitioner advisory team. I describe several ways that scholars can convey relevant research insights to practitioners, including presenting at practitioner conferences, writing for practitioners in traditional crossover journals and in shorter pieces like op-eds and blogs, and attracting the interest of those who write columns, blogs, and articles about research for practitioners. I conclude by describing a few ways that academic institutions can encourage more relevant research, focusing on journals, professional societies, and doctoral programs.

Governments and other organizations often outsource activities to achieve cost savings from market competition. Yet such benefits are often accompanied by poor quality resulting from moral hazard, which can be particularly onerous when outsourcing the monitoring and enforcement of government regulation. In this paper, we argue that the considerable moral hazard associated with private regulatory monitoring can be mitigated by understanding conflicts of interest in the monitoring organizations' product/service portfolios and by the effects of their private governance mechanisms. These organizational characteristics affect the stringency of monitoring through reputation, customer loyalty, differential impacts of government sanctions, and the standardization and internal monitoring of operations. We test our theory in the context of vehicle emissions testing in a state in which the government has outsourced these inspections to the private sector. Analyzing millions of emissions tests, we find empirical support for our hypotheses that particular product portfolios and forms of governance can mitigate moral hazard. Our results have broad implications for regulation, financial auditing, and private credit- and quality-rating agencies in financial markets.