Institutional Emergence in an Era of Globalization: The Rise of Transnational Private Regulation of Labor and Environmental Conditions

TLDR

Transnational private regulation has emerged as a means to certify corporate social and environmental performance, with scholars debating whether firms create such systems to solve market failures or through other institutional dynamics. The study aims to develop an account of institutional emergence that views institutions as outcomes of political contestation, analyzing conflict and institutional entrepreneurship among diverse actors. The author employs a comparative case study design to examine how these political and market‑based arguments explain the formation of social and environmental certification associations. The analysis demonstrates that both market‑based problem solving and political contention are necessary, revealing that strong market‑based approaches overlook the dynamics of political construction that generate new institutional forms.

Abstract

Why have systems of “transnational private regulation” recently emerged to certify corporate social and environmental performance? Different conceptions of institutional emergence underlie different answers to this question. Many scholars argue that firms create certification systems to solve problems in the market—a view rooted in a conception of institutions as solutions to collective action problems. The author develops a different account by viewing institutions as the outcome of political contestation and by analyzing conflict and institutional entrepreneurship among a wide array of actors. Using a comparative case study design, the analysis shows how these arguments explain the formation of social and environmental certification associations. Both theoretical approaches are needed, but strong versions of the market‐based approach overlook an important set of dynamics that the author calls the “political construction of market institutions.” The analysis shows how both problem solving in markets and political contention generate new institutional forms.