This project studies strategic interactions between private firms, regulatory agencies, and other stakeholders, and the consequences of these interactions for environmental policy and corporate environmental performance. It will pay particular attention to how these interactions are influenced by uncertainty and asymmetric information about firms? capabilities (technological and managerial) for environmental performance (present and future). The project will seek to identify characteristic patterns of strategic interactions, to assess their implications for environmental performance, and to develop and test formal models to explain these interactions and identify potential opportunities for intervention to improve environmental performance.
Approach: The project will include empirical and theoretical studies. It will conduct five to eight empirical case studies of environmental policy and regulatory issues that have exhibited diverse strategies and outcomes, including voluntary programs as well as regulations of various form and stringency. In addition, the project will assess, adapt, and develop formal models, drawing on existing models and theories from game theory and industrial organization, negotiation analysis, and the behavioral theory of the firm.
Expected Results: The project will significantly expand the available literature of strategically rich environmental policy case studies, and will advance understanding of regulatory strategies, government-industry interactions, and the effects of these interactions on environmental policy and performance. In so doing, it will help to identify specific strategies, lessons, and pitfalls, to provide practical guidance for organizational leaders in firms, NGOs, or government at local, state, national, or international level in their attempts to motivate firms to invest in and achieve high levels of environmental performance. It will, for example, give insights into conditions to maximize the effectiveness of voluntary alternatives to regulation; conditions under which regulatory threats or provision of information can be effective motivators; and provisions to elicit honest revelation of information about technological and managerial capabilities.