Self‐regulation, corruption, and competitiveness in extractive industries: Making transparency pay

Research Summary Self‐regulation is often proposed as a substitute for government regulation. We examine a setting in which a subset of firms voluntarily committed to transparency standards despite immediate competitive disadvantages, not merely to preempt regulation but to succeed under future mandatory rules they helped enact through lobbying. Focusing on the Extractive Industries Transparency Initiative (EITI), an anti‐corruption multi‐stakeholder initiative, we show that firms initially incurred competitive costs in corrupt markets after endorsing EITI. These firms subsequently lobbied for mandatory disclosure regulations. Once mandatory rules took effect, previously disadvantaged transparent firms gained substantial competitive advantages. Our study highlights how firms can integrate voluntary commitment with political advocacy to resolve collective action problems, reshaping both competitive dynamics and the regulatory landscape. Managerial Summary Firms frequently sign onto voluntary pro‐social or pro‐environmental initiatives to placate activists, avoid tougher regulation, or burnish reputations. We examine global oil and mining companies that backed the Extractive Industries Transparency Initiative (EITI), even though transparency commitments initially hurt their ability to win licenses in highly corrupt countries. Rather than stopping at voluntary disclosure, these firms aggressively campaigned for mandatory payment‐reporting laws that would level the competitive playing field. When governments eventually imposed those rules, early EITI supporters gained significant, sustained advantages. The study shows that combining voluntary transparency with targeted political advocacy lets companies steer regulation, convert short‐term costs into long‐term strategic gains, and address corruption.