Stimulating Regulatory Compliance and Ethical Behavior of Organizations: A Review

Regulators are responsible for overseeing organizations. Organizational behavior should be in line with laws and regulations. Therefore, regulators aim to influence behavior of regulatees, such as compliance (i.e., following rules and regulations), but also ethical behavior (i.e., doing the right thing, irrespective of the rules and regulations). However, little empirical evidence exists on the effectiveness of different types of regulatory actions. Also, most evidence focuses on compliance, despite an increasing demand for ethical behavior of organizations. A literature review was conducted to collect, summarize, and analyze empirical evidence on how regulators can stimulate regulatees’ compliant and ethical behavior. This paper uniquely covers multiple types of regulatory actions and also multiple types of underlying factors. To illustrate this, a novel framework was introduced, in which it was proposed that regulatory actions influence compliant and ethical behavior through regulatees’ capability, opportunity, and motivation. Combining the findings of 35 articles showed that studies on ‘deterrence’ and ‘cooperation’ demonstrated mixed results regarding their effectiveness, whereas ‘inspections’ were found more effective. Notably, psychological capability, social opportunity, and reflective motivation were more effective in stimulating behavior than physical capability, physical opportunity, and automatic motivation. A reflection on how regulators can use these unique insights to increase their effectiveness is given, as well as an aim to develop regulatory theory further.