Focal Points in Public Policy: Evidence from Voluntary Regulation

Abstract

AbstractNumerous studies argue that law affects behavior “expressively”—such as when states create focal points that overcome the coordination difficulties firms face. We argue that governments help firms overcome coordination dilemmas by explicating a preferred strategy for firms weighing investment in voluntary regulation. Firms would prefer to coordinate on a common strategy as a way of reducing the costs of voluntary regulation and increasing its benefits. We test our hypothesis about the efficacy of focal point selection with the European Union's (EU) advocacy of the Eco‐Management and Audit Scheme (EMAS) over a rival environmental management system, International Standards Organization (ISO) 14001. EU nations have statistically significantly lower rates of ISO 14001 certification than comparable countries at least in part due to their advocacy of EMAS. These results emphasize the role the state plays in coordinating business behavior even when such policy is simply expressive.