Institutionalized governance on organizations via norm‐based policy instrument: Evidence from cleaner production in China

Abstract Regulating organizations to align their private interests with public interests is important, especially for collective action problems in climate and sustainability governance. Whereas these issues are not satisfactorily addressed by conventional regulations, norms are envisioned as a promising alternative. But norm‐based policy instruments are not well understood regarding their scalable effects on substantive organizational actions, given the presence of other regulations. We advance a conceptual framework, accounting for norm‐based interventions' potential effects on organizational actions and their differences from conventional regulations in institutionalized governance. Based on the setting of cleaner production (CP) in China and an event study strategy, we provide empirical evidence consistent with the framework: non‐regulatory, norm‐based interventions led to nation‐wide, significant improvement in plant‐level CP; the effects were stronger via network‐based diffusion and local internalization, weakened by extrinsic motivation from regulations, and associated with managerial conformity, not innovation. We estimate substantive benefits of norms in public goods provision, with the amount of water saved equivalent to the consumption of a water‐scarce province in China. Our findings provide consistent explanations for norm‐based instruments in real governance settings, showing them as a complement to other policies in shaping organizations and guiding proactive transitions to address global challenges.