INTRODUCTION

One of the most important elements of the framework presented in chapter 1 is the notion of the policy life cycle. The strategic effects of corporate environmentalism differ greatly depending on the stage of the cycle in which an issue is at a given time. In this book, we present a series of models that lay out these effects in detail. Since our overall objective is to capture the interplay between corporate strategy and public policy, we devote careful attention to both variations in market structure and stages of the policy life cycle. This chapter provides a context for the chapters to come by surveying the political economy literature on legislative and regulatory behavior. Given the enormous amount of material that has been written on these topics, our review is necessarily highly selective. Our goal in this chapter is to highlight some of the most influential political economic models of legislative and regulatory behavior, and to explain the various models we have chosen to use for the study of corporate environmental strategy. This will prepare the reader for the analytical approach we will take in subsequent chapters.

COMPANIES AND MARKETS

Business firms vary widely in size, structure, and success. Nevertheless, economists have made enormous progress in understanding business behavior by using the simplifying assumption that companies maximize profits. Throughout this book, we will take this as a maintained hypothesis. However, we will consider a variety of different market structures within which a firm may operate, ranging from competitive to monopolistic.