Signaling without Certification: The Critical Role of Civil Society Scrutiny

37 Pages Posted: 16 Aug 2014 Last revised: 14 Jul 2016

See all articles by Susan Kayser

Susan Kayser

Erb Institute & Graham Sustainability Institute, University of Michigan

John W. Maxwell

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy; Indiana University, Department of Economics; Richard Ivey School of Business

Michael W. Toffel

Harvard Business School

Date Written: July 10, 2016

Abstract

In response to stakeholders’ growing concerns, firms are joining self-regulatory environmental programs to signal their superior environmental management capabilities. In contrast to the literature’s focus on programs featuring third-party certification, we theorize that programs lacking certification can nonetheless sometimes serve as credible signals by instead promoting civil society scrutiny, thus mitigating adverse selection. We hypothesize that (a) institutional environments that support civil society scrutiny and (b) organizational characteristics that increase the impact of that scrutiny enhance the credibility of the signal by making participation more costly for firms with inferior capabilities. Our theory is supported by examining the decisions by 2,604 firms in 44 countries whether to participate in the United Nations Global Compact.

Suggested Citation

Kayser, Susan and Maxwell, John W. and Toffel, Michael W., Signaling without Certification: The Critical Role of Civil Society Scrutiny (July 10, 2016). Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 15-009; Kelley School of Business Research Paper No. 2014-32. Available at SSRN: https://ssrn.com/abstract=2480097 or http://dx.doi.org/10.2139/ssrn.2480097

Susan Kayser

Erb Institute & Graham Sustainability Institute, University of Michigan ( email )

Dana Building
440 Church Street
Ann Arbor, MI, MI 48109-1041
United States

John W. Maxwell

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Department of Business Economics and Public Policy
Kelley School of Business, Indiana University
Bloomington, IN 47405
United States
812-855 9219 (Phone)
812-855 3354 (Fax)

HOME PAGE: http://johnwmaxwell.com

Indiana University, Department of Economics ( email )

Wiley Hall
Bloomington, IN
United States

Richard Ivey School of Business ( email )

The University of Western Ontario
1151 Richmond Street North
London, Ontario N6A3K7
Canada
5198502439 (Phone)
5198502306 (Fax)

Michael W. Toffel (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States
617.384.8043 (Phone)

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