Document Type

Working Paper

Publication Date

2007

Subjects

Business norms; certification; contracts; contract enforcement; corporate social responsibility; global governance; globalization; incomplete contracts; ISO; ISO 9000; law and development; norms transmission; outsourcing; rule of law; supply chains; theory of the firm; third-party assurance

Abstract

In this article we examine the rapid emergence and expansion of a private-sector compliance and enforcement infrastructure that we believe may increasingly be providing a substitute for public and legal regulatory infrastructure in global commerce, especially in developing countries where rule of law is weak and court systems are absent or inadequate. This infrastructure is provided by a proliferation of performance codes and standards, and a rapidly-growing global army of privately-trained and authorized inspectors and certifiers that we call the "third-party assurance industry." The growth in the third party assurance business has been phenomenal in the last decade. The business first developed to facilitate making and carrying out private contracts, but in recent years, assurance services are being deployed for purposes that are more appropriately seen as regulatory in nature. Third-party assurance may thus be providing a new institutional structure through which private commercial exchange is being harnessed and regulated for essentially public purposes.

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