Voluntary business initiatives can reduce public pressure for regulating firm behaviour abroad

Abstract

Almost all regulatory policy stops at the national border. Thus, when conducting business abroad, the behaviour of firms is regulated by their host, not their home country. Yet, international institutions have issued (non-binding) codes of conduct on social/environmental aspects of firm behaviour, and various high-income countries discuss how to improve extraterritorial firm behaviour – with high political contestation over the appropriate mix of state intervention and corporate self-regulation. Exploiting a unique national referendum on this issue in Switzerland, we investigate how these interact from a public opinion standpoint. Based on a nationally representative survey experiment (N=1564), we find that while baseline support for state intervention is high (approx. 60%), corporate self-regulation decreases such support. However, only credible voluntary business initiatives lead to substantial reductions. Our results speak to a broad policy debate in European countries and the EU on how to ensure compliance of firms with human rights and environmental standards.