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Signaling without Certification: The Critical Role of Civil Society Scrutiny

Author

Listed:
  • Susan A. Kayser

    (Kelley School of Business, Indiana University)

  • John W. Maxwell

    (Kelley School of Business, Indiana University)

  • Michael W. Toffel

    (Harvard Business School, Technology and Operations Management Unit)

Abstract

In response to stakeholders' growing concerns, companies are joining voluntary environmental programs to signal their superior environmental management capabilities. In contrast to the literature's focus on certification programs that require a third-party audit, we show that corporate participation in programs that lack certification but instead incorporate civil society scrutiny can, under certain conditions, serve as a credible signal of environmental management capabilities by discouraging firms with inferior capabilities from joining. Specifically, we hypothesize that (a) institutional environments that support civil society scrutiny and (b) organizational characteristics that increase the impact of that scrutiny enhance the credibility of the signal. We find empirical support for these hypotheses by examining the decisions by nearly 2,600 companies in 44 countries whether to participate in the United Nations Global Compact.

Suggested Citation

  • Susan A. Kayser & John W. Maxwell & Michael W. Toffel, 2014. "Signaling without Certification: The Critical Role of Civil Society Scrutiny," Harvard Business School Working Papers 15-009, Harvard Business School, revised Jul 2016.
    • Handle: RePEc:hbs:wpaper:15-009
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    References listed on IDEAS

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