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Limited support for the study hypotheses is evident in the relationship between ACA sector and perceived provision of technical assistance.
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A nonprofit with greater reliance on client fees-for-service, relative to other revenue sources, can be considered to reflect less “publicness” from an economic authority perspective.
Higher reported difficulty in complying with NOP regulations was associated with perceptions of higher propensity to administer sanctions.
Such explanations deserve future attention.
An exploratory analysis of dimensional publicness through nonprofit third-party administrators’ revenue sources similarly indicates a limited relationship between reliance on client fee revenue and perceived regulatory approaches.
Descriptive findings are presented first, and then multilevel analysis is used to independently account for differences in regulatory approaches associated with third-party regulatory organization sector, and those attributable to respondent-level attributes.
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Many contemporary regulatory programs rely on third-party organizations to fulfill monitoring and enforcement functions.
A second explanation is that nonprofit third-party administrators that are highly reliant on certification fees-for-service may be more concerned with the possibility of losing NOP accreditation (and thereby certification revenues), resulting in more conservative regulatory behaviors.
Seventeen are for-profit organizations, 11 are nonprofits, and 20 are from the public sector.
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Regulatory program designs relying on third-party organizations for regulatory administration draw attention to how the organizational characteristics of administrative organizations may affect program delivery.1 Sectoral designation as public, nonprofit, or for-profit shapes several organizational attributes that can influence a third-party administrator’s regulatory approach (van der Heijden 2010a,b).
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First, a Herfindahl-Hirschman Index (HHI) measure of market concentration was constructed as a proxy for the competitive pressures ACAs face by geographical area (e.g., Hannan 1997).
The relationship between ACA sector and regulatees’ perceived strictness of regulatory approach directly counters study expectations.
For example, relying on multiple third-party organizations for program delivery raises the question of whether organizational differences lead to divergences in the administration of uniform regulatory standards.
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Consistent with the expectation, greater reliance on client fee revenue is negatively associated with regulatee perceptions of ACAs’ strictness in regulatory interpretation.
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Nonprofit ACAs display the highest mean measure of flexibility, followed by for-profit ACAs, with public ACAs exhibiting the lowest reported flexibility.
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This study is concerned with how regulatory approaches may vary as a function of third-party regulatory organization sector.
This article examines such potential differences through a study of the entities charged with administering the US Department of Agriculture’s (USDA) National Organic Program (NOP).
The number of operations that NOP ACAs certify was included in the analysis in an attempt to account for organizational attributes outside of sector, and the measure indeed had statistically significant relationships with several ACA regulatory approach constructs.
Nonparametric tests (due to the extreme difference in group size) comparing these responses with those of the online sample revealed no statistically significant differences (p < .05).
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A secondary analysis explores an economic facet of dimensional publicness among nonprofit third-party administrators.
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Data were collected through an online survey of certified organic producers in the winter of 2013–20. In total, four survey requests were sent via email, separated roughly by 2-week intervals.
Scholars have raised similar concerns in regards to evolving quasi-governmental and voluntary regulatory regimes ranging from forestry regulation (e.g., Meidinger 2006; Pattberg 2006) to ski industry governance (e.g., Steelman and Rivera 2006).
Such an explanation is countered, however, by analysis findings which suggest no relationship between competitive pressures resulting from market concentration and regulatee perceptions of third-party administrators’ regulatory behaviors.
For example, taking the mean of multiple respondents to serve as regulatory approach construct indicators at the certifier level violates the independence of observation assumption, and variance in the number of respondents per certifier violates the assumption that the number of observations is equal across groups.
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Analysis results lend little support to the expectation that a higher reliance on client fee revenue is associated with an accommodative regulatory approach.
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The limited variation at level 2 and statistically insignificant likelihood ratio test statistics for the first two models suggest that multilevel modeling performs no better than standard linear regression in explaining dependent variable variation in some of the models.
The article concludes with three central contributions offered by this study.
Theorized relationship between exposure to competitive pressure and regulatory approach.
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To address this question, the study draws on regulatee perceptions of third-party administrator regulatory behavior.
I would also like to thank Peter May, Jessica Sowa, three anonymous reviewers, and JPART Editors for their helpful comments and suggestions that strengthened this article.
Rather than adopt a legalistic and punitive approach to its regulatory duties, such an organization will be inclined to “work with” regulatee clients to bring them into regulatory compliance (van der Heijden 2008).
Political jurisdictions may limit the number and variety of competitors with which a public organization’s service area overlaps.
In a third-party regulatory system such as the NOP, accreditation standards establish baseline regulatory practices, however, the greater the competitive pressures a regulatory organization is exposed to, the more likely the organization is to exhibit behaviors characteristic of an accommodative regulatory approach.
eds. 2011. The world of organic agriculture: Statistics and emerging trends 2011. Frick, Switzerland: Research Institute of Organic Agriculture (FiBL) and the International Federation of Organic Agriculture Movements (IFOAM).
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Mission-oriented service delivery and more diverse revenue sources, while not completely sheltering nonprofits from a competitive environment, suggest that they will face lower levels of competitive pressures than for-profit organizations that rely entirely on client fees.
This article seeks to provide a better understanding of the NOP, and the factors that influence the behaviors of third-party regulatory organizations generally, through an investigation of difference in public, nonprofit, and for-profit administrators’ regulatory approaches.
“Organic movement motive” data were also collected, to account for the extent to which supporting the organic movement motivates a respondent to pursue certification.
The following robustness tests also warrant mention: First, analyses were run without the “regulatory experience” variable in the event that this measure, due to endogeneity with dependent variable measures, obscured relationships between certifier characteristics, and regulatee perceptions of regulatory behavior.
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The investigation focuses on how sectoral designation as public, nonprofit, or for-profit is related to an organization’s regulatory approach.
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Totally, 6,273 producers were sent a survey request.
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Consistent with study hypotheses, public ACAs display the lowest mean willingness to provide technical assistance, while the reported willingness to provide technical assistance of for-profit ACAs is higher than that of public and nonprofit ACAs.
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In addition to examining the effect of organization sector, an aspect of dimensional publicness (Bozeman 1987; Dahl and Lindblom 1953; Wamsley and Zald 1973) is explored through a secondary analysis of the relationship between nonprofit regulatory organizations’ revenue sources and their regulatory approaches.
In contrast with enforcement philosophies, which pertain to how organizations perceive their roles, regulatory approaches can be observed and measured through regulatory behaviors and practices.
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Nonprofit organizations that rely on a mix of revenue sources face a variety of pressures and constraints in addition to competitive pressure from organizations within the same organizational field (Rose-Ackerman 1990).
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Analysis results provide no support for the study’s competitive pressure hypothesis predicting that when facing higher competitive pressures, third-party regulatory organizations are more likely to exhibit an accommodative regulatory approach.
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Some studies consider the enforcement styles of regulatory agencies as the unit of analysis (Braithwaite, Walker, and Grabosky 1987; Gormley 1998; Kagan 1989; May and Burby 1998), while others focus on inspectors as front-line regulatory actors (May and Winter 2000; May and Wood 2003).
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Finally, a regulatory organization with a service area that significantly overlaps with the service area of several competitors will experience greater competitive pressures than an organization with a limited geographic service area in which only a single competitor operates.
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Looking to the direction of the relationship between ACA sector and regulatory approach, as indicated by coefficient signs, the remaining results are mixed in regards to study expectations.
The aim of this study is to investigate the extent to which organization sector affects third-party regulatory administrators’ regulatory approaches in the administration of uniform regulatory standards.
Future research can further examine the extent to which regulatee characteristics impact their perceptions of monitoring and enforcement actions and how this may relate to compliance among regulated entities.
Although these do not eliminate the possibility of nonresponse bias impacting study findings, the results suggest that the threat of nonresponse bias may be small.
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At the time of this writing, no publicly available records exist to indicate how common ACA-administered notices of noncompliance are.
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It is possible that organization sector, at least in this case, is not the most important organizational attribute in explaining differences in regulatory approaches.
An important factor to take into account in light of the study’s findings is that the regulatory arrangement in question places constraints within which regulatory administrators must operate (Black 2002, 2008; May 2002).
Identifying the factors that influence an administrative organization’s regulatory approach can be important in explaining the relative success of a program at promoting regulatee compliance.
Note: Operations can hold more than one type of organic certification.
Countering study expectations, few noticeable differences (as measured by regulatee perceptions) between public, nonprofit, and for-profit sector ACA regulatory approaches are evident.
In addition to the multilevel analyses, ordered logit analyses with clustering by ACA were conducted, with no substantial difference between the results of the two analytical methods.
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As noted by May and Winter (2000, 145), a variety of labels have been applied to describe the practices of regulatory agents, such as their regulatory approach, method, style, and strategy.
In further analyses, the ACA state market share variable was interacted with the state HHI measure, under the expectation that the influence of ACA market shares is likely moderated by the competitiveness of the state market in question.
Under the NOP, certifier service areas that overlap geographically, combined with the fact that operations choose their certifier, create a competitive environment in which certifiers compete for regulatee clients.
Regulatory scholars have examined the attitudes and actions with which regulatory organizations conduct their monitoring and enforcement functions from different perspectives.
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While the central focus of this study was the relationship between third-party administrators’ sectors and regulatory approaches, a secondary analysis explored the relationship that dimensional publicness shares with nonprofit third-party administrators’ regulatory approaches.
In these analyses, the proportion of ACA revenues derived from fees-for-certification services was included as a proxy for economic authority dimensional publicness, with the proportion of client fees serving as a “privateness” measure.
In another example, third-party administrators that rely on regulatee service fees for revenue may be prompted to consider client defection when deciding when and how to sanction for regulatory noncompliances.
As displayed in figure 1, contrasted with an accommodative regulatory approach, at the deterrence end of the regulatory approach, spectrum regulatory organizations adopt a strict interpretation of regulatory directives, exhibit a greater propensity to administer sanctions in response to noncompliances, are less willing to make accommodations for regulatee circumstances, and are less likely to offer regulatees technical assistance.
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To understand how organization sector affects a third-party organization’s regulatory approach, it is necessary to take into account how such organizational characteristics interact with a regulatory context to create incentives, opportunities, and constraints for regulatory administrators (May 2002; van der Heijden 2015).
As seen below, nonparametric tests (due to the extreme difference in group size) comparing these responses with those of the online sample revealed no statistically significant differences at the p <.05 level.
Formalism refers to the relative rigidity and rule-adherence that regulators exhibit.
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These hypothesized differences in third-party administrator regulatory approaches are examined in the context of third-party administration of NOP regulations.
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ACAs in turn certify operations according to national organic regulations, and inspect certified operations for regulatory compliance.
One explanation for this finding is that higher reliance on client fees-for-service is reflective of an organizational scope more likely limited to certification and regulatory functions, resulting in lower flexibility in regulatory application.
This explanation, however, overlooks the impact of regulatory context and external constraints such as those imposed by the NOP as an accreditation body.
Future research can further examine under which regulatory arrangements third-party administrator characteristics do or do not impact regulatory approaches, and how.
For example, respondents’ evaluation of the extent to which NOP regulations reflect their ideal organic standards had a statistically significant relationship with their assessment of their administrators’ strictness of regulatory interpretation, propensity to administer sanctions for minor noncompliances, flexibility, and provision of technical assistance.
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Third-party regulatory designs introduce complexity and potentially conflicting incentives that can impact program delivery.
No statistically significant differences between the dependent variable responses of different survey waves were found (p < .05).
This section discusses possible explanations for the study’s null findings.
Operations that earn less than $5,000 a year from organic product sales are exempt from this requirement.
The focus of this study is how organizational form is associated with third-party administrators’ regulatory approaches.
The level of competitive pressure that ACAs are exposed to is represented at the certifier level of analysis by the state market share variable, and at the respondent level of analysis by the state HHI variable.
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Second, analyses were run with organic operation size categories included as dummy variables (“average” operations serving as the reference category), to ensure that statistically insignificant findings in regards to this variable were not the product of treating the measure as interval data.
A strength of the approach over past studies that rely on self-reported regulator data (e.g., Gormley 1998; May and Burby 1998; May and Winter 2000), however, is that regulatees may face fewer pressures to report “favorable” regulatory actions in a manner that could bias study findings.
Regulatory approach is conceptualized here as a combination of a regulatory organization’s strictness in regulatory interpretation, propensity to administer threats, flexibility, and willingness to provide assistance.
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Study findings are presented in this section in relation to these theorized relationships.
It was hypothesized that the proportion of revenues derived from client fees is likely to be positively related with regulatee perceptions that reflect an accommodative regulatory approach (H4(b)).
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The findings indicate that little systematic variation in regulatory approaches can be attributed to administrator sector.
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Flexibility construct findings indicate that nonprofit ACAs are on average perceived more likely than for-profit ACAs to allow regulatees to correct for noncompliances prior to sanctioning them, while public ACAs are perceived to be less likely than for-profit ACAs to make such an allowance.
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Furthermore, countering the assumption that competitive pressures are likely to influence third-party administrator regulatory behaviors, certifier market share and state market concentration measures shared no apparent relationship with regulate perceptions of third-party administrator regulatory behavior.