Using stakeholders to your advantage: An experiment on the effectiveness of reputation management instruments to gain authority

EU agencies place great value on their reputation. Especially in terms of technical expertise and performance, EU agencies want to be seen favourably by their relevant audiences and strategically communicate with that aim. A positive reputation is argued to increase authority, which EU agencies need given their limited formal mandate. We, however, lack evidence of whether EU agencies (can) strategically bolster their authority and if so, under what conditions. In this paper, I theorize how stakeholder engagement is employed by (EU) regulatory agencies to gain authority over their political principals and employ a survey experiment with European Commission officials to test it. This is a crucial next step in the study of EU regulatory agencies and their strategic efforts to carve out their spot in the EU regulatory space. Regulatory authority is needed for effective regulation but, if unchecked, authority over principals can result in agent drift and regulatory failure. To argue how authority is gained, I build on and contribute to the bureaucratic reputation literature, principal-agent models and interest group literature (in particular resource exchange theory). I expect that stakeholder engagement contributes to the authority of agencies as it allows them to leverage the information asymmetry that they have over their political principals, such as the European Commission. Political principals need to evaluate the agencies’ conduct and output. They, however, lack the expertise and resources to judge the quality of all agency output reliably. Political principals thus rely on heuristics to form a judgement. I argue that stakeholder engagement is such a heuristic. If done (and crucially presented) well, engaging with stakeholders can signal to political principals that agencies have gained certain resources in establishing their output. This builds authority as the principal’s judgement of the agency’s output is not solely based on merit, but on how it perceives the agency; its reputation in the eyes of the European Commission. Stakeholder engagement is likely more successful under certain conditions than others. I expect that the European Commission allows for more agency authority when signals suggest that output contains resources the European Commission needs. This is the case when the participation of business actors is high. High business participation signals that the agency has tapped into their technical expertise, which is highly sought after by the European Commission. Contrastingly, the European Commission may also be convinced by a diverse set of stakeholders as this signals the independence they want from the agency and its output. Furthermore, I expect that these dynamics are moderated by politicization. The European Commission may no longer solely rely on these heuristics when the stakes are higher but on the merit of the agencies’ opinion itself. These assumptions are tested with an elite survey experiment with European Commission officials as participants. As survey experiments with EU-level officials are rare and allow for more causal validity, this paper contributes methodologically to the literature on EU regulatory governance. It allows for tapping into the decision-making biases of the officials at the heart of the proposed theory.