July 16, 2017

Download Voluntary Programs: A Club Theory Perspective by Matthew Potoski, Aseem Prakash PDF

By Matthew Potoski, Aseem Prakash

A conceptual framework and empirical case reviews of the coverage influence of voluntary courses backed by means of undefined, govt, and nongovernmental agencies.

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Additional resources for Voluntary Programs: A Club Theory Perspective

Sample text

Externalities can have the attributes of private goods (a club obligating participating firms to pay higher wages), public goods (a club obligating participating firms to reduce greenhouse gas emissions), or even club goods (a club prescribing participating forestry firms from harvesting a forest revered by an aboriginal group). This distinction in the nature of externality benefits is critical because it sheds light on the external actors (and their motivations) that are likely to pressure firms to join a club.

Suppose a group of firms joins a voluntary program that requires it to produce some social externality. Some firms in this group might fail to live up to their obligations, either by intention or ignorance, yet these firms would continue to receive the benefits of program membership simply because outside stakeholders could not differentiate the shirking firms from the nonshirkers. This problem has serious implications for voluntary programs. Nonshirker members would be less inclined to continue with the program.

As the ‘‘credible commitment’’ literature suggests (North and Weingast 1989), of course, actors can devise mechanisms for tying their hands—that is, credibly committing to upholding the rule system and not opportunistically changing it. Nevertheless, it is fair to say that as an institutionalized governance system, clubs enjoy a degree of legitimacy that an average firm alone may find difficult to acquire. By joining a club whose rules they cannot change easily in the short run, firms credibly signal their commitment to producing positive externalities.

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