Determining how firms decide to comply with government regulations

Hypotheses relevant to how firms decide to comply with government regulations, particularly federal equal employment opportunity requirements, are developed and tested. Findings support economic models of compliance and conclude that detection and sanctions influence compliance decisions. Modifications to the economic model that account for bounded rationality are theorized. Empirical support is obtained for adjustments that substitute perceived probability of detection and probable level of sanctions for actual probabilities, and that recognize individual actors within the organization. The proposed model also accounts for, and findings support, the influence that characteristics of enforcement programs have on compliance decisions. Different investigative techniques are shown to have varying influences on compliance decisions; specifically, class investigations appear to have the greatest effect on preferred compliance due to their ability to stress the consequences of detecting noncompliance. In addition, the existence of supplemental State and local agencies increases preferred compliance. Hypotheses were tested by surveying key actors in equal employment opportunity compliance decisions: the hiring official, the personnel officer and the Equal Employment Opportunity Officer. The sample consisted of firms in the Washington, D.C. area so that federal contractors (who have more equal employment requirements than other private employers) would be included. Further, the sample was constructed to draw more respondents from high technology firms to control for factors such as unionization.