Self-regulation, corruption, and competitiveness in extractive industries: Making transparency pay

Abstract

Self‐regulation is often proposed as a substitute for government regulation. We examine a setting in which a subset of firms voluntarily committed to transparency standards despite immediate competitive disadvantages, not merely to preempt regulation but to succeed under future mandatory rules they helped enact through lobbying. Focusing on the Extractive Industries Transparency Initiative (EITI), an anti‐corruption multistakeholder initiative, we show that firms initially incurred competitive costs in corrupt markets after endorsing EITI. These firms subsequently lobbied for mandatory disclosure regulations. Once mandatory rules took effect, previously disadvantaged transparent firms gained substantial competitive advantages. Our study highlights how firms can integrate voluntary commitment with political advocacy to resolve collective action problems, reshaping both competitive dynamics and the regulatory landscape.

Keywords: self-regulation, non-market strategy, stakeholder management, corporate transparency, corruption, Integrated strategy, multi-stakeholder initiative

JEL Classification: L5, L71, M14, M16