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Reputation Matters in the Regulatory State: Re-thinking the Fundamentals of Regulatory Independence, Credibility and Accountability

Periodic Reporting for period 2 - RICA (Reputation Matters in the Regulatory State: Re-thinking the Fundamentals of Regulatory Independence, Credibility and Accountability )

Reporting period: 2018-12-01 to 2020-05-31

Drawing on insights from literature on bureaucratic reputation, the project aims to challenge, re-conceptualise and redefine core foundational assumptions of the European regulatory state. The regulatory state discourse has evolved in isolation from, and has overlooked key insights from, reputation-based approaches on bureaucratic behaviour and ‘the politics of reputation’. A reputational lens has however, potentially wide-ranging and fundamental implications for our understanding of the regulatory state’s legitimising credentials, for our conceptualisation of its key features as well as their interrelation. More specifically, this project looks at its implications for our construction of the link between agency insulation and regulatory credibility, for our understanding of public accountability and the main drivers of behaviour in accountability, with consequences for the relationship between regulatory independence and accountability.

Reputation-based accounts emphasise the key role of reputation, of organisational image, to understanding bureaucratic power and organisational behaviour. For public organisations (such as regulatory agencies), the successful cultivation of a strong reputation becomes critical to securing regulatory authority beyond formal fiat. In this understanding, the reputation a public organisation cultivates—thorough its response to expectations from its multiple audiences—is the primary source of its power, which can allow it to enlist public support, build its autonomy, protect it from external attacks and ultimately, help ensure its survival. The study of reputation is thus fundamental for public bureaucracies.

A core assumption that the project examines is that of the assumed link between agency insulation and regulatory credibility, re-assessing what shapes stakeholders' perceptions of regulatory outputs. Within dominant understandings, regulatory credibility is said to be premised on agency insulation from politics: independent bodies alone, operating at arm’s length from traditional controls, can secure credible regulation. This assumption has had fundamental systemic implications in practice: the independent agency model has become the defining model for organising regulation across jurisdictions, with significant implications for the structural makeup of nation states and for the rise of non-majoritarianism. Surprisingly, this assumption has not been directly empirically tested. We put the assumption to rigorous empirical testing: Does higher regulatory independence result in higher perceived credibility of regulatory outputs among agency stakeholders?
In terms of main results, we would emphasise in particular the following contributions. A key contribution of the project has been to develop robust measurements that allow us to operationalise, measure and study the reputation of public sector organisations in a systematic manner. To that end, we developed a novel quantitative (dictionary-based) measure of bureaucratic reputation, which allowed us to study how regulatory agencies communicate with - and respond to expectations from- their stakeholder audiences. Our measurement can be used by other scholars to study how regulatory agencies and public organisations more broadly in various jurisdictions communicate and respond to expectations from their various audiences. Additionally, together with two external collaborators, we deductively built, tested, and cross-validated a survey instrument to measure the reputation of a public organisation - a “reputation barometer” - through two surveys of 2,100 regulatory stakeholders. The empirical tool we devised measures an agency’s reputation and its building blocks. The barometer will allow scholars to distinguish and measure which aspects of reputation public organisations are “known for” and build their claim to authority on, as well as how the profiles of public organisations differ in this respect. At the same time, this also equips practitioners with a reputation barometer tailored to the public sector- while such tools exist for the private sector, this was not the case for public organisations. It will allow practitioners to measure the reputation of their organisation, in a differentiated fashion, among different stakeholder groups. These reputation measures allowed us to study systematically how regulators communicate, which aspects of their functioning they emphasise to their audiences - and how in turn, they are perceived by their regulatory audiences- as well as to reflect theoretically on how these empirical findings square with the core theoretical tenants of the regulatory state.
Among others, the project goes beyond established wisdom by testing in a robust manner - both observationally and experimentally - a foundational assumption of the literature that endowing regulatory agencies with greater independence increases the credibility of their outputs. This assumption has been central to the worldwide popularity of the agency model as the dominant model for organising regulation across countries and policy sectors. Ours is the first study to directly test the relationship between independence and regulatory credibility, drawing on a survey experiment with 220 regulatory stakeholders. The employment of an experimental design enabled us to rigorously examine the causal effects of perceived independence on regulatory credibility. To the best of our knowledge, this is the first study to experimentally examine the factors that shape the perceptions of a broad array of stakeholders regarding agencies’ scientific regulatory outputs. The findings are significant: while some evidence of an association between regulatory independence and credibility is there observationally, we do not find sufficient support for a causal mechanism. These weak correlations and null findings are significant given the vast influence this assumption has wielded over regulatory practice and the sweep of structural reforms undertaken in its name across countries and policy domains. At the same time, we show that the credibility of regulatory outputs is greatly influenced by stakeholders’ prior positions. We found that those stakeholders who tend to support pesticides in the first place would find a regulatory outcome to approve a pesticide more credible than a decision to ban one, and vice-versa. Stakeholder assessments of the credibility of the regulatory outputs is shaped by partisan/ideological expectations of what constitute good or desirable outcomes. In other words, stakeholders are skeptic about the quality of regulatory outputs that contradict their ideological positions, despite them being produced by independent bodies. Moreover, our findings suggest that these prior positions have a greater effect on credibility compared with the effect of their perceptions of agency independence. Our findings reveal the limitations of the rationalistic assumption, central to regulation literature, that controversial areas can be depoliticized through institutional insulation from political control to effectively secure regulatory credibility. A main implication of our study is that controversial regulatory areas are not automatically depoliticized by design. In such areas, independent agencies are likely to face ongoing criticism of their outputs, despite the institutional insulation measures undertaken to secure depoliticized scientific decision-making. This could make them an easy target for political actors and stakeholders that ideologically-oppose specific regulatory outcomes.