Events

Dr. Victoria (Shu) Zhang
Postdoctoral Associate
School of Management
Yale University

Why do non-compliant practices persist in the face of regulations? This paper unpacks variations in regulatory compliance by investigating how social networks and regulations work in tandem. Using a longitudinal network consisting of 312,351 physicians from 2015 to 2017 and a triple-differences design, I find that the effects of regulations are dampened in networks with non-complying peers but amplified in networks with compliant peers. Moreover, distinct network typologies support compliance and non-compliance. Non-compliance is more likely to persist among centrally embedded professionals surrounded by non-complying peers – consistent with a “safety in numbers” mechanism. However, attentiveness to compliant peers did not vary by network centrality. Peer influence also varies by tenure. Older professionals are more attentive to peers in adopting compliant practices. Importantly, the introduction of the regulations also shifted the peer influence process by activating stronger influence from compliant peers. This paper contributes to the intersection of regulations and social networks literature by showing that peer influence and regulations work in tandem to drive variations in compliance. The implications are three-fold. First, non-compliance is sustained in the presence of deviant peers. Social reinforcement from compliant peers is key to realizing regulatory efforts. Second, regulations activate stronger peer influence, pushing prior “holdouts” into complying. Finally, this work advances our understanding of how different network typologies perpetuate distinct network-based mechanisms of influence. The findings help explain pockets of regulatory compliance and resistance and hold implications for curtailing professional deviance.