Regulatory roles and functions in information-based regulation: a systematic review
| Published date | 01 June 2020 |
| Author | Frances Bowen,Panos Panagiotopoulos |
| Date | 01 June 2020 |
| DOI | 10.1177/0020852318778775 |
| Subject Matter | Articles |
Review of
Administrative
Article
Sciences
International Review of Administrative
Regulatory roles and
Sciences
2020, Vol. 86(2) 203–221
!
functions in information-
The Author(s) 2018
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based regulation:
DOI: 10.1177/0020852318778775
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a systematic review
Frances Bowen and
Panos Panagiotopoulos
Queen Mary University of London, UK
Abstract
Information-based regulation occurs when regulators use information to drive changes
in behaviours in order to achieve public policy objectives. Information-based regulation
has emerged as an alternative way to regulate firms compared with more traditional
direct command-and-control and market-based policy instruments within the contem-
porary regulatory state. Despite growing international interest, challenges remain in
understanding the roles for regulators in information-based regulation, the functions of
regulators in shaping and leveraging information flows, and the administrative capacities
required to fulfil them. Based on a systematic review methodology, this article synthe-
sises the findings of 130 peer-reviewed articles in the environmental, energy and food
policy areas. It develops a typology of functions for regulators and outlines the new
administrative capacities required in the contemporary regulatory state, particularly in
standard setting, assurance and intermediation, and smart data management.
Points for practitioners
Regulation by information is becoming popular in many part of the world beyond its
original genesis in the US and other developed countries. The design and implementa-
tion of such schemes creates new challenges for regulators. Our review integrates
Corresponding author:
Frances Bowen, School of Business and Management, Queen Mary University of London, Mile End road,
London, E1 4NS, United Kingdom.
Email: F.Bowen@qmul.ac.uk
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International Review of Administrative Sciences 86(2)
relevant research in three policy areas (environment, food and energy) and develops a
new typology of functions performed by regulators. The article is the first to discuss
how the roles and functions of regulators need to change in the contemporary infor-
mation and regulatory environment. It also emphasises the importance of regulatory
involvement in information-based regulation, which has traditionally been seen as a
deregulatory approach.
Keywords
administrative
capacity,
information-based
regulation,
regulatory
state,
smart
disclosure, systematic review
Introduction
Over the last two decades, regulators have placed increasingly detailed disclosure
requirements on firms. Publishing nutritional information on food products, post-
ing restaurant hygiene ‘scores on the doors’ and listing pollutant emissions on
online inventories have all been used as a way to indirectly regulate firms’ behav-
iours. These are examples of information-based regulation (IBR), an intentional
form of intervention by regulators in which information is used as a primary
mechanism to influence firm behaviours in order to achieve public policy objec-
tives. Interest in IBR has been rising within the Better Regulation agenda in
Europe (Radaelli and Meuwese, 2009) and the Obama administration’s smart
disclosure task force (National Science and Technology Council, 2013). IBR has
also spread far beyond its initial genesis in the US and other developed countries
like the UK and Japan to emerging economies like the Philippines, Indonesia and
China (Blackman, 2008; Lee, 2010; Lee et al., 2013).
Despite growing international interest, challenges remain in understanding the
roles, functions and administrative capacities of regulators to effectively design,
implement and maintain such schemes. Regulators need to perform fundamentally
different functions to support their new roles compared with earlier modes of
regulation, such as direct command-and-control or market-based policy instru-
ments. In direct command and control, regulators alter firm behaviours through
prohibiting certain practices or mandating whether particular technologies can be
used or not. These required regulators to develop scientific expertise and conduct
risk-based analyses of implemented measures. Alternatively, in market-based
schemes like imposing a tax on waste to landfill or subsidising renewable energy,
regulators influence firm behaviours through altering economic incentives. This
required regulators to apply economic principles to model the impact of markets
and prices (e.g. Parker, 1999). In contrast, IBR emphasises public and/or private
attempts to increase the availability of information in order to influence individ-
uals’ or firms’ choices (Tietenberg, 1998). Using information to trigger desired
Bowen and Panagiotopoulos
205
regulatory outcomes requires administrative capacities beyond risk-based science
and market economics. There has been insufficient research so far to understand
how regulators can shape the informational context for IBR.
IBR has gained in popularity because, in theory, it offers a way to deliver
regulatory outcomes at a lower cost to regulators or is seen as a deregulatory
approach (Weil et al., 2013). However, in practice, IBR requires stronger admin-
istrative capacity, both in terms of material and managerial regulatory resources,
than is usually assumed, especially for such initiatives to be sustained (Lee et al.,
2013; Newman and Bach, 2004). Although research has discussed a variety of
administrative capacities (e.g. Lee et al., 2013; Wegener et al., 2011), the focus
has been on the quantity of material and managerial resources needed rather than
its nature. We still know too little about the administrative capacities needed to
effectively deploy state power through an information-based regulatory frame-
work. Hence, the aim of this article is to address the following questions: (1)
‘What roles and functions do regulators perform in contemporary IBR to influence
firms’ behaviours?’; and (2) ‘What are the implications for the administrative
capacities required to support these roles and functions?’
IBR in the regulatory state
The regulatory state is characterised by using regulatory frameworks to deploy
state power, rather than violence, the provision of welfare or directly owning or
controlling resources (Walby, 1999; Yeung, 2010). IBR is central to new coordi-
nation economies where the regulatory state expands its traditional approach to
activities such as standard setting or compiling and distributing market informa-
tion (Ahdieh, 2010). Within the contemporary regulatory state, regulators are
expected to play new roles, including delivering effective behavioural change with-
out direct mandates or owning provision. Using information to shape behaviours
is often portrayed as a softer, negotiated form of control deployed by the regula-
tory state to achieve policy objectives (Moran, 2003).
IBR poses new challenges within the regulatory state as regulators attempt to
harness information that they cannot directly control, particularly within network
arrangements and especially in a transnational context (Rommel and Verhoest,
2014; Sabel and Zeitlin, 2012). As a result, IBR can require different types of
involvement by regulators. Although IBR is often portrayed as a deregulatory
instrument, the balance of research so far suggests that IBR works when there is
a regulatory ‘gorilla in the closet’ (Rees, 1997; Verbruggen, 2013) or where schemes
operate ‘in the shadow of the regulator’ (Short and Toffel, 2008). IBR requires
sufficient administrative capacity to monitor and enforce (Lee, 2010; Lee et al.,
2013), even though the key capacities needed in the contemporary regulatory state
may be widely dispersed among both state and non-state actors and unevenly
within the state sector (Newman and Bach, 2004). While theorists recognise the
importance of administrative capacities to support the operation of IBR, too little
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International Review of Administrative Sciences 86(2)
Figure 1. Indicative information flows in IBR.
is known about the skills and competences needed within regulatory agencies to
make IBR work.
In theory, IBR can influence the behaviour of individuals, households, consum-
ers, firms and governments through various economic, psychological or socio-
political mechanisms (e.g. Konar and Cohen, 1997; Lee, 2010; Thaler and
Sunstein, 2008). Previous research has shown that information disclosure can
drive changes in business behaviours either directly or indirectly through the reac-
tions of consumers, investors, media and other social actors (see Figure 1). As
regulators place direct information obligations, guidance and mandatory require-
ments on firms, firms need to change their internal practices to be able to deliver.
Simply implementing an internal measurement, reporting and disclosure system
can improve managers’ awareness of firms’ processes (Lim and Prakash, 2014).
However, these schemes have had less than anticipated success in direct behaviour
change due to high set-up costs and the social dynamics and political interests
around new auditing practices (Fleiter et al., 2012). IBR can also drive indirect
behaviour changes within the markets and social structures in which information
flows are embedded (Fung et al., 2007). Mandating or encouraging corporate
disclosures can assist a range of civil society actors in determining whether a
firm is meeting their expectations; in turn, research has shown how firms respond
to being rated by regulatory agencies, investor groups or third-party...
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