Firms' choice of regulatory instruments to reduce pollution: A transaction cost approach

Magali Delmas, Alfred Marcus

Research output: Contribution to journalReview articlepeer-review

25 Scopus citations

Abstract

This paper compares the economic efficiency of firm-agency governance structures for pollution reduction using transaction costs economics. Two governance structures are analyzed with the transaction costs approach: command and control regulation (CCR) and negotiated agreements (NAs). We propose that the choice of governance structure depends on the strategies firms pursue given the attributes of their transactions and their market opportunities. The application of transaction cost economics analysis leads to different choices of regulatory instruments. Firms in more mature, stable industries are likely to choose command and control, while firms in new, dynamic sectors are more likely to opt for negotiated agreements. Frequency of transactions is a key factor in firm choice.

Original languageEnglish (US)
Article number3
Pages (from-to)1-20
Number of pages20
JournalBusiness and Politics
Volume6
Issue number3
DOIs
StatePublished - Dec 2004

Keywords

  • Command and control regulation
  • Environmental pollution
  • Environmental regulation
  • Environmental voluntary agreements
  • Governance stucture
  • Negotiated agreements
  • Transaction cost economics

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