Good fences make good neighbors: An institutional explanation of industry self-regulation

TY - CONF

T1 - Good fences make good neighbors

T2 - 66th Annual Meeting of the Academy of Management, AOM 2006

AU - Barnett, Michael L.

AU - King, Andrew A.

PY - 2006

Y1 - 2006

N2 - Understanding of decentralized institutions has been hampered by a lack of longitudinal research on their formation and function. We conduct a 21-year panel analysis of conditions in the chemical industry before and after the emergence of a decentralized institution. We find that a critical event created a potentially damaging industry commons, and we find evidence that a newly formed self-regulatory institution reduced the risks associated with this commons. Surprisingly, however, we find that the institution accomplished this role not by protecting member organizations from the acts of other firms, but by protecting the entire industry from the acts of member firms. Thus, our findings support a functionalist view of institution formation, where that function is to parcel the reputation of individual firms from that shared with their rivals. Our findings also suggest that additional longitudinal empirical studies are essential to uncovering the underlying functions of decentralized institutions.

AB - Understanding of decentralized institutions has been hampered by a lack of longitudinal research on their formation and function. We conduct a 21-year panel analysis of conditions in the chemical industry before and after the emergence of a decentralized institution. We find that a critical event created a potentially damaging industry commons, and we find evidence that a newly formed self-regulatory institution reduced the risks associated with this commons. Surprisingly, however, we find that the institution accomplished this role not by protecting member organizations from the acts of other firms, but by protecting the entire industry from the acts of member firms. Thus, our findings support a functionalist view of institution formation, where that function is to parcel the reputation of individual firms from that shared with their rivals. Our findings also suggest that additional longitudinal empirical studies are essential to uncovering the underlying functions of decentralized institutions.

KW - Functionalist perspectivee

KW - Industry self-regulation

KW - Reputation commons

UR - http://www.scopus.com/inward/record.url?scp=85087999973&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85087999973&partnerID=8YFLogxK

U2 - 10.5465/ambpp.2006.27176340

DO - 10.5465/ambpp.2006.27176340

M3 - Paper

Y2 - 11 August 2006 through 16 August 2006

ER -