Institutional Emergence in an Era of Globalization: The Rise of Social and Environmental Certification Systems.

How do institutions of industry governance emerge? Predominant answers stress the generative role of market dynamics, arguing that market failures and disruptions lead firms to engage in collective action to build institutional solutions. An alternative political-institutional approach suggests that new institutions are constituted through political struggles involving multiple types of actors in an organizational field. To assess these arguments' utility for understanding how globalization generates new institutions, I examine the recent rise of systems for certifying companies to social or environmental standards. The market-based approach sheds some light on certification systems, but it cannot explain a key paradox about their emergence-namely, why non-governmental organizations and governments played such important roles in building these market institutions. By highlighting ways in which political conflicts and existing orders channel institutional entrepreneurship, the political-institutional approach explains how governance institutions can emerge even when capitalist collective action is spotty and market benefits are tenuous. While market models of institutional emergence are increasingly common in the social sciences, this paper shows that their derivative treatment of politics limits their ability to explain even a strongly market-oriented type of governance institution. [ABSTRACT FROM AUTHOR]