Responsive regulation (4): Evidence and findings

We now have a good understanding of the breadth and depth of responsive regulation. We have seen that the theory provides a broad set of heuristics and hands-on strategies to improve regulatory practice—and that it is about much more than the famous regulatory pyramid. We have also seen that responsive regulation is applied in a large number of countries and a wide variety of policy areas. Thus, it is time to ask the hard question: does it work?

To answer the does it work question, this blog post gives a summary of the systematic review of the responsive regulation literature that I have carried out over the last months. From a set of initially more than 1,000 academic journal articles that cite Responsive Regulation, I distilled 30 articles that have directly “measured” the performance of responsive regulation as an overall strategy to regulatory practice. In addition, I traced 35 additional articles that provide indirect observations of the performance of responsive regulation.

The two sets of articles allow me to answer two related questions:

• Whether does responsive regulation (on average) outperform alternative regulatory strategies (i.e., traditional government-led command and control regulation, or laissez-faire market competition)?
• Under what circumstances does responsive regulation work best?

At first glance: it depends

The 30 articles that have directly observed the performance of responsive regulation in practice report on 24 unique examples (some articles discuss the same example). When considering these 24 unique examples, responsive regulation is found to outperform alternative strategies in eight cases and performs weaker than its alternatives in six cases. In addition, in ten cases scholars report that the performance of responsive regulation is highly dependent on how it is implemented by (individual) regulators and how it is experienced by (individual) targets of regulation, how it interacts with other regulatory reforms that were implemented in parallel, or that responsive regulation did not perform better or worse than the alternative strategies.

The positive performance reported ranges from being substantial (e.g., increased tax revenue for the Florida Department of Revenue[i]; increased energy savings by Chinese firms[ii]) to being only modestly better (e.g., increased compliance with human right standards by global garment manufacturers[iii]). Yet, often the increased performance is not quantified (in half of the positive performance observations). This also holds for cases with negative or unclear performance: the observed performance is only reported in qualitative terms. This finding is, of course, not surprising. Scholars of regulation often find it very difficult to measure the exact performance of a regulatory strategy—as do governments—which makes one-on-one quantitative comparisons of regulatory strategies virtually impossible.[iv]

Long story short, when overviewing the evidence-base, the answer to the question of whether responsive regulation (on average) outperforms alternative regulatory strategies is best summarised as: it depends. Over 25 years after the publication of Responsive Regulation and ongoing arguments for and against its use in practice, this all but a satisfying answer. That being said, looking beyond these direct performance observations, the set of 30 articles provides a wealth of insights about the factors that affect the performance of responsive regulation.

At second glance: we know a lot about how to make responsive regulation work well

While the evidence base falls short of making a one-size-fits-all argument for or against responsive regulation, it does provide us with a wealth of information about how to best implement it.

Train your staff in being responsive

A recurring observation is that responsive regulation requires careful implementation. Particularly street-level bureaucrats need guidance documents, training, or both, to be able to deal with the increase in discretionary space that comes with responsive regulation, and specifically the tit-for-tat strategy. Otherwise, there is a risk of inconsistency in enforcement, favouritism, abuse of process, uneven application of law, or rule ambiguity. Inconsistent enforcement by and between street-level bureaucrats may undermine the knowledge that targets of regulation have.

These findings do not only hold at the level of street-level bureaucrats but also at organisational and supra-organisational levels: differences in the application of responsive regulation between regulatory agencies within a country, or even between countries as a whole may undermine the performance of regulatory regimes. In sum, in applying the regulatory pyramids, the main challenge is the shifting between different regulatory actors: “Attractive as the theory of responsive regulation is at the primary, interactional level … it does not get us as far when we consider the effects of shared and interlocking jurisdictions in multi-level regulatory systems. The elements of responsiveness, difficult to produce at the primary level [street level], are even more difficult to produce at secondary [entities and activities that create and maintain infrastructure (the rating and certification bodies) and entities such as courts that hear appeals] and tertiary [policy making] levels”.[v]

Explain your targets what your responsiveness means

A second recurring observation considers the transparency and clarity of the responsive regulation process and the regulatory dialogues involved—put simply, improved or simply more communication between regulators and their targets is by no means a guarantee for enhanced compliance. Targets of regulation do not always understand or appreciate the purpose of a responsive regulation approach as a means for seeking compliance in collaboration with the regulators. For example, those who are less knowledgeable of the regulations they are subject to will likely experience escalation up a regulatory pyramid as threatening or even bullying. Or, as a communication process, responsive regulation may simply be too demanding for (some) targets. Targets are also likely to misinterpret the regulators and consider them in general as harsher than what the regulator intends.

Responsive regulation is expected to be more effective if it is known in the regulated sector that the regulator will follow through on its escalation strategy; likewise, if the regulator is known to be “soft”, it will likely undermine overall compliance in the industry. In a nutshell, it may be helpful for a regulator to explain the responsive regulation strategy to its targets at the start of a regulatory relationship, and to have in place transparent public procedures and other measures that help to prevent that the relationship between regulator and target becomes too intimate. For example, when bringing third-parties into a regulatory regime, regulators may have to explain how being involved is in their interest exactly.

Time the start and escalation of the responsive regulation dialogue well

A third recurring observation builds on these insights. Responsive regulation is expected to be more effective when regulators and their targets have multiple interactions (rather than a one-off engagement) and when the targets of regulation have a (or are reminded of their) long term time horizon. The start of a responsive regulatory dialogue may set the tone for these interactions, and sometimes a penalty or fine at this start of the dialogue may have significant symbolic value to show that the regulator is severe and has the power to enforce compliance. Also, without explaining what a responsive process entails, there is a risk of a “vicious circle of antagonism”[vi] if regulators follow responsive regulation to the letter: harsh enforcement of already sceptic targets of regulation will likely make them even more sceptic.

Indeed, the escalation to a more formal stance can easily “backfire once a certain threshold of formalism has been reached”.[vii] Besides, in contexts where the rule of law is weak, targets of regulation may be regulator-driven rather than regulation-driven. In such contexts the “more reasonable and regulatee-friendly approach” suggested by responsive regulation may backfire as targets of regulation may see the regulator as weak and easy to manipulate.[viii] In such contexts, regulators may need to “go hard, go early” in escalating to more intrusive responses. Last but not least, responsive regulation may yield different results across age groups and socio-demographic groups.

Prevent stepping into the obvious traps of responsive regulation

A final set of recurring observations highlight the risks of responsive regulation. When the focus of a regulatory strategy is on escalation, regulators may choose to pursue the “easy cases” and avoid “hard cases”. This could be simply because the easy cases take less effort to enforce (more bang for the buck), but also because there are legitimacy and accountability risks in more complex cases—i.e., regulators know they are more likely to slip up in such cases. Also, regulators may face severe political or societal criticism if an incident is linked to their “soft and facilitative” approach to regulatory enforcement. They may then be expected to move to harder and more formalistic enforcement. Still, such a change in regulatory practice may result in a rapid breakdown of trust between regulators and their targets.

Another risk of responsive regulation (particularly enforced self-regulation and other forms of delegated regulation) is that targets of regulation have “systems, rules and procedures demanded by regulatory law” in place but do not apply them, or do not have staff that understands how and why to apply them.[ix] In such situations, it is not enforcement (the use of the benign-big-gun) but monitoring that keeps targets of regulation no their toes. Finally, tripartism may backfire when third-parties are biased towards reporting some violations and not others. For third-parties, it is likely easier to observe highly visible but low-risk violations than invisible but high-risk violations. As a result, a regulatory agency finds itself with having to process (more) low-risk violations at the expense of processing high-risk violations.

Seeing the forest for the trees

This blog post probably has the highest information density that I have pulled together thus far. It is therefore good to end with a few major lessons from the literature that help us to see the forest for the trees:

• First, just having responsive regulation strategies in place (for example, a regulatory pyramid) is no guarantee that they are used in regulatory practice, let alone that they are used well. Staff needs training, targets of regulation need explanation, and agencies need alignment of how responsive regulation is operationalised in practice.
• Second, just cherry-picking responsive elements will not result in a satisfactory regulatory regime. While Responsive Regulation provides hands-on strategies, they need to be implemented within the larger philosophy of the theory—a flexible and context-sensitive approach to regulation that seeks compliance through the least intrusive intervention possible.
• Third, a static responsive regulation regime may lose its effectiveness over time when staff at regulatory agencies change, or when targets learn to roll with the punches of the regime. As with, ideally, any approach to regulation, a responsive regulation regime needs to involve an element of learning and updating based on lessons learnt.
• Fourth, because of its flexibility, the language of responsive regulation can easily be abused to push a neo-liberal deregulation agenda or a repressive regulation agenda. Regulators and their targets need to keep asking questions about what their responsive regulation implies exactly.  
• Fifth, and following on from the above, responsive regulation is ideally introduced as part of a suite of regulatory reforms. Without additional training of staff, transparent and accountable public procedures, and ongoing learning and improvement, it is unlikely that real-world application of responsive regulation will live up to its theoretical promises.

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[i] Christian, C. (2017). Enhanced enforcement outcomes through a responsive regulation approach to sales tax enforcement. Journal of Public Budgeting, Accounting & Financial Management, 29(4), 464-497.

[ii] Zhu, J., & Chertow, M. R. (2019). Authoritarian but responsive: Local regulation of industrial energy efficiency in jiangsu, china. Regulation & Governance, 13(3), 384-404.

[iii] Islam, M. A., & McPhail, M. (2011). Regulating for corporate human rights abuses: The emergence of corporate reporting on the ilo’s human rights standards within the global garment manufacturing and retail industry. Critical Perspectives on Accounting, 22(8), 790-810.

[iv] In addition, many studies were carried out only a few years after a responsive regulation was introduced (typically fewer than five years). It could be that a formal change of a regulatory regime needs more time to settle before its anticipated results will be achieved.

[v] Heimer, C. (2011). Disarticulated responsiveness: The theory and practice of responsive regulation in multi-layered systems. University of British Columbia Law Review, 44(2), 663.

[vi] Mascini, P., & van Wijk, E. (2009). Responsive regulation at the dutch food and consumer product safety authority: An empirical assessment of assumptions underlying the theory. Regulation & Governance, 3(1), 27-47.

[vii] May, P., & Wood, R. S. (2003). At the regulatory front lines: Inspectors’ enforcement styles and regulatory compliance. Journal of Public Administration Research and Theory, 13(2), 117-139.

[viii] Yee, W.-H., Tang, S.-Y., & Lo, C. W.-H. (2016). Regulatory compliance when the rule of law is weak: Evidence from china’s environmental reform. Journal of Public Administration Research and Theory, 26(1), 95-112.

[ix] Hutter, B. (2001). Is enforced self-regulation a form of risk taking?: The case of railway health and safety. International Journal of the Sociology of Law, 29(4), 379-400.