Trust Problems in Interdependent Regulatory Chains

Just as the value chains in industry have become ever longer and intertwined, circumventing often the globe, so have subsequently also the much looser lists of and links between actors involved in regulation and governance of the different stages of these value chains. Along the value chain there can be a variety of public, semi-public and private actors/organizations active, which may have to cooperate, rely, or build upon the work of earlier inspections. Not only do rule-makers depend on the expertise, loyalty and willingness of the implementing public ‘street level bureaucrats’, often in distant physical as well as organizational/cultural worlds. The same is the case between various private rule and standard setters, e.g. retail chains and their inspectors and enforcers. And not in the last place there may also be significant dependence from public and private actors in different stages of controls (and vice versa).

Within these chains quality controls are often in whole or partly delegated to a variety of intermediate and supporting organizations, such as certifiers, accreditation bodies, auditors and accountancy firms, laboratories, experts, advertisers, and networks of all these organizations, which differ e.g. in specialization, expertise and interests. These often commercial intermediaries have become especially important in global value chains, where public regulators are limited, confined as they are to their territorial jurisdiction. The variety of intermediaries could perhaps be classified using, or even extending, the categories of ‘judgment devices’ in markets, that the French economic sociologist Karpik has distinguished: networks, appellations, cicerones, rankings, and confluences.

The parties in these regulation-chains will have to trust each other to some extent. Just as every transaction in the value chain involves potential uncertainty, risk, and trust problems, so do the inter-organizational relations in the parallel ‘regulation chain’. That may exactly be the motive to engage specialized experts in the process. The paper will, after distinguishing the types of organizations and of their mutual relations, delve further into these trust relations and on the variety of sources on which parties can base their trust, such as personal acquaintance, repeated interaction, interdependence, expertise, credentials, visibility (brand names), info exchange and social status in networks, the reputation effect, yet other third party authorities, even cultures of honor or rumors. Thus the paper will connect various literatures, on regulation and governance, policy styles, trust, and from modern economic sociology. Theoretical typologies will be developed while making references to examples in various value and regulatory chains, including scandals and crises, notably in the food sector.