School of Social and Political Sciences - Theses

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    The effects of public voluntary regulation in developing country contexts: comparing regulatory performance across sectors and firms in Indonesia
    Bahruddin ( 2020)
    In recent decades, governments worldwide have embraced public voluntary regulation as a non-mandatory regulatory strategy with the aim of improving socio-environmental performance in business. While such non-mandatory approaches to government regulation originated in North America and Europe, they have also been employed by a range of developing country governments, raising questions about the capacity of public voluntary regulation to function in developing country contexts. Existing regulatory scholarship has not yet developed a systematic framework for understanding how and why the effects of public voluntary regulation vary across different countries, sectors and firms, and if and how public voluntary regulators can adapt regulatory strategies to accommodate variation in such multiple dimensions of institutional context. This thesis aims to answer these questions by investigating how the capacity of public voluntary regulation to improve socio-environmental performance in regulated companies is mediated by varied institutional contexts. Analysis draws on a qualitative study of a prominent public voluntary regulatory program in Indonesia—PROPER (Industrial Environmental Rating Program). Drawing on empirical findings from extensive in-country field research together with theoretical insights on public voluntary regulation, political economy, environmental governance and CSR; the thesis presents a comparative analysis of how the PROPER program operated across two contrasting sectors (oil and gas and palm oil), and across state-owned and private firms. Findings indicate there is significant potential for public voluntary regulation to improve socio-environmental performance within the distinctive context of a developing country. However, specific regulatory strategies and their effects are shown to be highly sensitive to country, sectoral and firm contexts. Analysis identifies three key contextual factors that played a key role in the extent to which PROPER was able to improve socio-environmental performance: (1) the degree of pressure from third-party firm stakeholders (such as NGOs, communities, investors or consumers); (2) the sensitivity of firm management to government pressure, which depended in turn on the degree of discretionary power that government could exercise over firm managers through corporate governance arrangements and/or political patronage networks; and (3) the capacity and incentives of government to provide technical assistance to firms. These factors are shown to vary significantly between industrial sectors, and between private and state-owned firms, which in turn influenced the Indonesian regulatory environment. Findings also highlight the distinctive ways in which Indonesian regulators adapted public voluntary regulatory strategies to the Indonesian context—relying much more on informal, discretionary sources of state authority, than ‘background threats’ of formal regulation, on which much prior regulatory scholarship has focused. These findings are shown to have significant implications for both the theory and practice of public voluntary regulation in developing countries.