Focal Points in Public Policy: Evidence from Voluntary Regulation

Abstract

Numerous 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 when they explicate a preferred strategy for firms weighing investment in voluntary regulation. Firms seeking the advantages of self-regulation 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 within the context of the European Union's advocacy of the Eco-Management and Audit Scheme (EMAS) over a rival environmental management system, ISO 14001. Our data are from a broad variety of nations both inside and outside the EU, and our statistical analysis accounts for other institutional factors thought to cause the adoption of both environmental management systems. EU nations have statistically significantly lower rates of ISO 14001 certification than comparable countries and higher adoption rates of EMAS. These results emphasize the role the state plays in coordinating business behavior even when such policy is simply expressive.