Governance through Global Networks and Corporate Signaling

Abstract

The article exposes a new form of global governance based on an emergent network of corporate social responsibility (CSR) schemes. Our study is the first to uncover the network structure of this system, based on a dataset that includes 61 transnational CSR schemes and 31,987 firms. We demonstrate that the network exhibits a significant level of cohesiveness, despite having evolved outside the formal framework of the international treaty system. Drawing on social network analysis, we find a positive correlation between the sustainability performance of the firms, their membership in CSR schemes, and their network characteristics. We show that membership in multiple schemes and the firms’ position in the CSR-schemes network constitute credible predictors of their sustainability performance, generating a separating equilibrium that distinguishes top CSR performers from low ones. We develop a model that explains the effectiveness of the CSR-schemes network, based on the network synergistic properties and on a distinctive signaling dynamic. Our findings highlight the potential contribution of CSR to the resolution of global governance dilemmas.