Why Are Larger Motor Carriers More Compliant with Safety Regulations?

Abstract

Abstract:A common finding from both the regulatory compliance and motor-carrier safety literatures is that larger firms are more compliant with safety rules than smaller firms. However, complementary yet alternative explanations have been advanced to explain this empirical regularity. Some scholars argue larger firms' greater resource endowments allow them to make more investments to ensure safety compliance. Other scholars argue larger firms have more incentive to operate in compliance with safety rules because they have more brand equity at stake and are more exposed to regulatory enforcement. As these explanations suggest different policy implications, identifying findings uniquely consistent with one or both mechanisms is important to further efforts to improve carriers' safety compliance. This article leverages archival motor-carrier safety data and estimates different econometric models designed to isolate effects that are uniquely consistent with these alternative mechanisms. The results provide evidence uniquely consistent with each mechanism. This article concludes by explaining theoretical contributions, detailing managerial implications, and offering policy suggestions.