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Abstract

This research addresses the assumption that general deterrence is an important key to enhanced compliance with regulatory laws. Through a survey of 233 firms in several industries in the United States, we sought to answer the following questions: (1) When severe legal penalties are imposed against a violator of environmental laws, do other companies in the same industry actually learn about such signal cases ? (2) Does knowing about signal cases change firms compliance-related behavior? It was found that only 42 percent of respondents could identify the signal case, but 89 percent could identify some enforcement actions against other firms, and 63 percent of firms reported having taken some compliance-related actions in response to learning about such cases. Overall, it is concluded that because most firms are in compliance already (for a variety of other reasons), this form of explicit general deterrence knowledge usually serves not to enhance the perceivedthreatof legal punishment, but asreassurancethat compliance is not foolish and as areminderto check on the reliability of existing compliance routines.

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