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The Firm as an Inspector: Private Ordering and Political Rules

Published online by Cambridge University Press:  20 January 2017

Adrienne Heritier ,
Anna K. Mueller-Debus  and
Christian R. Thauer
Adrienne Heritier
Affiliation:
European University Institute Florence
Anna K. Mueller-Debus
Affiliation:
European University Institute
Christian R. Thauer
Affiliation:
European University Institute
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Abstract

With increasing fragmentation of worldwide production chains and the corresponding contracting relations between companies, the “firm as an inspector” has become a frequent phenomenon. Buyer firms deploy supervising activities over their suppliers' products and production processes in order to ensure their compliance with regulatory standards, thereby taking on tasks commonly performed by public authorities. Why would a firm engage in such activities? In this article we will analyze the conditions under which firms play the role of an inspector vis-à-vis their sub-contractor firms to guarantee compliance with quality and environmental regulations. We develop a theoretical argument based on transaction cost economics and institutionalism to offer hypothetical answers to this question and provide an empirical assessment of our hypotheses.

Keywords

governanceenvironmental & quality standardsindustrySouth Africa
Type
Article
Information
Business and Politics , Volume 11 , Issue 4 , December 2009 , pp. 1 - 32
Copyright
Copyright © V.K. Aggarwal 2009 and published under exclusive license to Cambridge University Press 

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