Regulation and Economic Globalization: Prospects and Limits of Private Governance

Abstract

Corporate codes of conduct, product certifications, process standards, and other voluntary, non-governmental forms of private governance have proliferated in the last two decades. These innovations are a response to social pressures unleashed by globalization and the inadequacy of governmental institutions for addressing its social and environmental impacts. Private governance has had some notable successes, but there are clear limits to what it alone can be expected to accomplish. We hypothesize that the effectiveness of private governance depends on four main factors: 1) the structure of the particular global value chain in which production takes place; 2) the extent to which demand for a firm's products relies on its brand identity; 3) the possibilities for collective action by consumers, workers, or other activists to exert pressure on producers; and 4) the extent to which commercial interests of lead firms align with social and environmental concerns. Taken together, these hypotheses suggest that private governance will flourish in only a limited set of circumstances. With the trend towards consolidation of production in the largest developing countries, however, we also see a strengthening of some forms of public governance. Private governance will not disappear, but it will be linked to emerging forms of multi-stakeholder institutions.

Global value chains in a post-Washington Consensus world

“…Interventions and pressure points that allow for change in this system. Economic globalization is a byproduct of international production and trade networks organized by transnational firms and it is embedded in various kinds of regulation, including rules of the game established by international institutions, national government policies, and varied forms of private governance used by non-state actors to manage activities in GVCs (Mayer and Gereffi, 2010). One potential outcome of the current situation is that public governance will be called upon to play a stronger role in supplementing and reinforcing corporate codes of conduct, product certifications, process standards and other voluntary, non-governmental types of private governance that have proliferated in the last two decades, and that multi-stakeholder initiatives involving both public and private actors will arise to deal with collective action problems.…”

Governance challenges of cocoa partnership projects in Indonesia: seeking synergy in multi-stakeholder arrangements for sustainable agriculture

“…Partnership literature generally recognizes that the trajectory of private governance cannot be addressed without simultaneously considering the trajectories of public governance (Mayer and Gereffi 2010). Gulbrandsen (2012), for example, suggests that private standards and public policies can reinforce each other, particularly in cases where the state depends on private activities to realize its public objectives.…”

Economic and Social Upgrading in Global Value Chains and Industrial Clusters: Why Governance Matters

“…Governance structures are complex, and they include international as well as national regulations, and both public, private, and social forms of governance (Gereffi and Fernandez-Stark 2011;Mayer and Gereffi 2010). GVC scholars tend to focus on how external conditions and pressures, particularly by global buyers and through a variety of public and private governance processes, facilitate the diffusion of global standards and affect economic and social upgrading in developing countries ; cluster scholars, by contrast, focus more on the social and cultural bonds and inter-firm learning and cluster institutions in local areas, which are considered critical for cluster upgrading (Lund-Thomsen and Pillay 2012;Schmitz 1995;Schmitz and Nadvi 1999).…”