Dynamics of spatial interdependence: the contingent effect of international trade on voluntary environmental standards

Previous research has shown that international trade exposure promotes the diffusion of voluntary environmental standards, such as ISO 14001, from importing nations to exporting nations. However, previous studies have not theorized about the conditions under which trade diffusion is most effective. We argue that international trade exposure influences ISO 14001 adoption rates in countries that have yet to achieve high domestic adoption levels relative to the global average. But if a country achieves a high domestic adoption level, companies have incentives to certify their operations for domestic reasons, and these incentives dominate international influences. Thus, we expect the relative importance of international pressure to decrease as the domestic adoption level increases. International diffusion of ISO 14001, therefore, may not reflect a ‘race to the top’. We test this theory against a global panel dataset on ISO 14001 adoption rates for the years 1995–2007. <br> <b>Keywords:</b> voluntary environmental standards, ISO 14001, diffusion, panel ECM