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Master Thesis

Lobby regulation in the EU –

Does culture play a role in the development of quality

differences?

Teresa Zeyn

Student number: s2982757(Groningen), 21419944 (Göttingen) E-mail: teresazeyn@yahoo.de

June 14th 2016

Double Degree Programme

MSc International Economics and Business & MA International Economics Faculty of Economics and Business, University of Groningen

Faculty of Economic Sciences, University of Göttingen Supervisor: Dr. Robbert Maseland (Groningen)

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Abstract

Lobbying is an important factor for a democratic society. In recent years the opinion spread in Europe that regulation is needed to promote the benefits and avoid the drawbacks of lobbying. The implementation of such regulations was very diverse across the EU and resulted in differences in the quality of regulation. I study if this is due to the cultural influences. Using the culture measures Power Distance and Uncertainty Avoidance, I find evidence that Power Distance is positively connected to the quality of lobby regulation and Uncertainty Avoidance has a negative influence on the transparency and integrity of regulations.

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Contents

List of Tables...ii List of Figures...ii 1. Introduction...1 2. Literature Review...2 2.1 Lobbying...3 2.1.1 What is lobbying?...3

2.1.2 Reasoning in the regulation debate...5

2.1.3 Differences between countries' lobby regulations...8

2.2 Culture...11

2.2.1 Attitudes towards lobbying...14

2.2.2 Attitudes towards regulation...15

2.2.3 The relationship of culture and (lobby) regulation...16

3. Data...19

4. Methodology...22

5. Results...23

5.1 Variables and regression...23

5.2 Discussion...26

6. Conclusion...29

7. References...iii

8. Appendices...vii

A Survey questions...vii

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List of Tables

Table 1: PDI and UAI country scores...25

Table 2: Regression results – Total score and Transparency...27

Table 3: Regression results – Integrity and Equality of Access...27

Table B1: Countries included in the different sources...viii

Table B2: Results of the lobby regulation index...ix

Table B3: Results of the lobby regulation index – EU...ix

List of Figures

Figure B1: Lobby Regulation and Power Distance...ix

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1. Introduction

In the recent past a public debate has taken place across the European Union (EU) if and how to regulate lobbying (Fuchs, 2015; Lange & Deckwirth, 2015; McSmith, 2011; Mulcahy, 2015; Newton, 2011). The connection between the interests of lobby groups and political decisions is considered to have a strong influence on the developments in a society and in a country. Lobby activities have benefits and drawbacks for a political systems. On the one hand, these activities can facilitate the information access for politicians so that they can make well-grounded decisions. On the other hand, lobby groups can use their influence on politicians to give their opinion more weight than that of other citizens. Thus, the regulation and transparency of lobbying activities are an important topic to be researched.

In the western world there is a wide consensus that lobby regulation of some kind and in some extent is necessary. However, the approaches to regulating lobbying activities are very diverse across the EU. An explanation for this situation could be the differing predominating opinions on what kind of lobbying is beneficial, which type of regulation could be harmful for society and economy, and what the exact definitions of lobbyist, lobby target, and lobbying activities are. To understand these differences better and to be able to find ways to overcome them, the cause of these differences needs to be understood. In this paper I argue that such differences have their roots in the national cultures.

In the history of the EU the question how independent the member countries should stay or how integrated the EU should become has been part of many debates. Keywords were sovereignty and subsidiarity and were often used in the discussion on which topics the EU institutions should have the decision-making power and on which it should remain with the national parliaments. A special focus of this debate are the regulations of certain aspects, such as financial supervision or environmental policies (Golub, 1996; Moloney, 2010). An aspect that has only recently come into focus of the legislators of the European Commission was the question if lobbying activities need to be regulated more or not (Commission of the European Communities, 2006; Greenwood, 1998; Holman, 2009).

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Europe is a comparatively small continent but nonetheless accommodating many different nations and cultures. In the past, there has been a lot of research on how culture is influencing the behavior and decisions of individuals and countries (Alon & Higgins, 2005; Cagliano, Caniato, Golini, Longoni, & Micelotta, 2011; Granato, Inglehart, & Leblang, 1996). But how different are the member countries of the EU in terms of culture? And do these differences have an influence on the country's way of regulating lobbying activities? If there is a connection the harmonization of lobby regulations cannot be achieved by solely implementing the same laws. But the regulations need to be adapted to different cultural reasoning and perspectives in each country on the pros and cons of lobbyism. This would make the coordination a lot more complicated than the case that the development of different regulation over time was mostly influenced by coincidences and chance.

In order to be able to structure the future coordination of these regulation it is important to know where the roots of the national differences lie.

Thus, I am researching if there is a relationship between culture and lobby regulation in EU countries. I hope to contribute to the European integration with the results and give implications on what could be done to further integrate the national regulations in the EU member countries.

The paper is structured as follows. In the next section the literature is reviewed and the theoretical background as well as the hypotheses of this thesis are developed. The third and fourth section present the data and the methodology that are used in the paper. The results of the culture analysis and the connecting to lobby regulation are shown and discussed in section five. In the Conclusion part in section six the results of this study serve as a basis to develop implications for the European integration.

2. Literature Review

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2.1 Lobbying

Lobbying is a way to present the interests of a certain group to the individuals who make the political decisions. In general, it can be said that each person wants his or her opinion to be noted and respected, wants to influence the events. So, lobbying activities are a form of communication (Miller & Dinan, 2008).

2.1.1 What is lobbying?

The word lobby originates from a roofed walk in monastic cloister and transformed over time to the description of the entrance halls of parliaments that were used as a gathering places for politicians and representatives of Special Interest Groups. The use of lobbying as a word for making your position known to politicians and influencing the final decision making arose in the US (Oxford Dictionaries, 2016).

The definition used in this paper is taken from the Green Paper of the European Commission (EC). Lobbying “means all activities carried out with the objective of influencing the policy formulation and decision-making processes of the European institutions.” (Commission of the European Communities, 2006: 5). Accordingly, lobbyists are

“persons carrying out such [lobbying] activities, working in a variety of organisations such as public affairs consultancies, law firms, NGOs, think-tanks, corporate lobby units (“in-house representatives”) or trade associations.” (Commission of the European Communities, 2006: 5)

In other words, lobbying can be described as appealing to the government as a third party for the interests of an individual or a group of citizens (Pross, 2007).

I find these wordings to be a good combination of many other formulations and very fitted to describe the topic of this paper. Although the exact phrasing is not very important in this paper, it is supposed to give a good overview what the research is about. In contrast, the exact definitions are very important when it comes to regulations.

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hindering too many lobby activities. If they are too narrow actual lobbyists could bypass the rules and so the regulations would be ineffective (Pross, 2007).

The main actors can be identified as the lobbyist, the lobby target (mostly government officials of some kind), and the persons who are responsible for the regulation of lobbying activities and their enforcement (OECD, 2009). For the argumentation in the following sections it needs to be mentioned that regulations can be seen as form of institutions in a country, as institutions are “the rules of the game” (North, 1990: 3). Regulations are defined as formal in contrast to informal institutions such as norms or values (North, 1990). Thus, reasoning that includes institutions can also be valid for the special case of regulations.

Now I look on an information report for lobbyists in order to give an impression on the different actors and potential ways of acting.

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complex matter with different levels of acting. For each channel and each level the opinions about ethical and acceptable practices can differ.

Having defined the main actors and potential forms of lobbying, the next sub-section introduces the main arguments of the lobby regulation debate, such as the benefits or disadvantages of lobbying activities and the pros and cons of a regulation.

2.1.2 Reasoning in the regulation debate

In the recent past, the debate over regulating these lobby activities has become public in Europe (“Bundestag veröffentlicht Lobbyisten-Liste,” 2015; Fuchs, 2015; McSmith, 2011; Newton, 2011). But what exactly are the benefits and drawbacks of lobbying?

Lobbying can be seen in a very positive light and as an essential part of the democratic political system (Mulcahy, 2015). Lobby activities play an important role in democracies and have a justification in this political system. Individuals can contact politicians and present their requests to them. They can do this on their own or hire others to do it on their behalf. In addition, today's politicians cannot have the level of knowledge on all topics that is required to make deliberate decisions. Lobbyist can provide the necessary information and support better founded decisions. So, lobbying can be beneficial for a nation (OECD, 2009). An argument against regulation could be that this positive relationship could be harmed and bad political decision would be the result.

Lobbying can also cause costs for the society if unequal influence on government decisions results in biased decision making (Greenwood & Thomas, 1988). The group with the most power or money can present its view of a topic better or to the more influential persons. This does not have to be correlated to the size of the Special Interest Group. Thus, the opinion of a powerful minority could be influencing the political decision over-proportional if no regulation of these lobbying activities is in place. This opinion might be beneficial for the group itself but that does not have to be the case for the whole society. Thus, lobbyists have a lot of influence on the political decision in a country. This influence can be positive or negative.

The importance of lobbying in the political system is especially true for the EU institutions in Brussels as a lot of the decision making power was transferred from the national level to the institutions of the Union (Burson-Marsteller, 2005).

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interests to the decision makers in order to make the best decision for the whole country.

Furthermore, regulations can be considered necessary due to the intricacy of today's political decisions. The procedure how politicians come to an opinion can get vast and hard to understand for the general public. Without regulation this can lead to corruption and other distorting activities (Pross, 2007). In addition, the acceptance of and trust in the political system could be harmed if the citizens cannot comprehend the procedures.

Politicians themselves are known to the public and their activities are largely controlled. To provide a satisfying transparency for the citizens such regulation is also needed for the lobbyist (OECD, 2009), as they are part of the political process. Thus, in order to enable the public to understand the process of decision making and who has influence on it, lobbying cannot be conducted in the dark. This would undermine the sovereignty of the people.

Regulation can also be seen as a general tendency to promote a behavior that is considered as ethical by the public (Pross, 2007).

Should a country choose regulation it needs to ensure that it is effective. If regulation fails it can have negative influence on the political process. For example, a register for lobbyists. A failure of this type of lobbying could result in a decreased chance for registered lobbyists to present their interests, a demotivation to register or a declining number of lobbyists altogether. Moreover, the data gathered based on the registration could be biased if only certain lobby groups or industry sectors are covered (OECD, 2014). In addition, as with every form of regulation the administrative effort must not be too high. Otherwise, the rules might do more harm than good to the society and the economy, slowing down the process or discouraging actors to participate. Pross (2007) describes some examples. Revealing too little information would bring no additional value, requiring too much information could distract the public from the essential information.

In general, the quality of regulation can be evaluated with respect to benchmarks such as efficiency, legislative authority, or expertise (Baldwin, Cave, & Lodge, 2012). However, as the regulation of lobbying is a very special case, this paper will refer to the following benchmarks.

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gathered information needs to be found that is not overwhelming for legal and organizational system. Each country has its own history and therefore a different status quo in terms of the legal system. This needs to be kept in mind when developing a lobby regulation (OECD, 2009).

The essential parts for effective lobby regulation are also acknowledged by Transparency International (TI), which substitutes efficacy with equality of access. A transparent regulation needs to provide that the public can comprehend the relations between both parties, the officials and the lobbyists (Mulcahy, 2015). The whole procedure of legislation should be visible for the public. If this is ensured everyone can control if his or her interests are represented in a good way. Furthermore, a transparent process can build trust in the government as the behavior of the politicians can be controlled (Pross, 2007). Integrity is secured if regulations are definite, enforceable and binding for all actors. Finally, every opinion, or at least a good sample of them, should be enabled to have influence on the decision making to allow for an equality of access (Mulcahy, 2015). Transparency, integrity, and equal access to policy decisions are the benchmarks used in this paper. Even though they are not specific for the quality of lobby regulations but could be used for many types of rules. Of course, the validity and definition of these benchmarks can be argued. Nonetheless, they are often used in the international evaluation. Moreover, the index that is used in this paper is very detailed and provides a comprehensive look on the lobby regulations. The relationship between lobby regulation and culture can be researched on the general level as well as on the three sub-levels: Transparency, integrity, and equality of access.

There are several possibilities how to structure such a regulation. The regulation of lobbying activities is conducted by governments, using laws, guidelines or self-regulation of lobbyists. Regulation can be solely directed on lobbyists or on the connection between lobbyists and the politicians (Greenwood & Thomas, 1988). Countries can introduce registers on a mandatory or optional basis when aiming for more transparency. Developing and promoting many different forms of participation can increase the equality of access to the decision makers. The integrity could be improved by designing rules for ethical behavior (Mulcahy, 2015).

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revealed and in what time frame it needs to be updated. Such information can include the lobbyist's clients, financing or lobby targets (Pross, 2007). If the connection between lobbyists and politicians is the aim of the regulation, possible actions can be to register the frequency and duration of meetings or the allowed ways of getting into contact with the decision makers.

Another important part of such a regulation are the consequences for violating the rules. The penalties need to be feasible and deterrent (Pross, 2007). Examples of regulations in the EU countries can be found in the following sub-section.

2.1.3 Differences between countries' lobby regulations

A lot of research has been done on the different approaches and developments of lobby regulation, even whole journal volumes have been dedicated to this purpose (Chari, Murphy, & Hogan, 2007). The main focus laid on the comparison of the North American and the European continent, as the USA are seen as the pioneer in lobby regulation, followed by Canada, Germany, and the European Parliament (Holman & Luneburg, 2012; Holman, 2009; Ridley, 1998; Thomas, 2008). Others have focused on specific parts of the lobbying field, such as the “revolving door”-phenomenon (Chari et al., 2007), the role that a single firm can play in the system of lobbying (Lastauskas, 2013), or on a specific political environment (Kammerer, 2014).

The differences between the North American and the European continent were covered by Chari, Murphy, and Hogan (2007). They found that the US, Canada, the EU, and Germany had regulations of lobbying activities in place. The first country to ever pass such a bill were the USA in the 1930s. The regulations were further developed with two major acts in 1946 and 1995, which broadened the definition of lobbyists and the requirements of reporting for lobby groups. On the North American continent, Canada followed in 1989. In Europe, Germany was the only country that had a lobby regulation in place when the study was conducted in 2007.

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between the two occupations. The Canadian and US American federal states were seen as “medium” or “relatively highly regulated systems” (Chari et al., 2007: 427). These required stricter registration rules, a detailed accounting for the money that was spend, controls and penalties for disregarding the rules, and a so called “cooling-off period” between ending the job as a legislator and starting as a lobbyist (Chari et al., 2007).

Hrebenar, Nakainura, and Nakamura (1998) studied the lobby regulation in Japan. There was almost no regulation at all and the common practice was to carry out meetings between lobbyists and officials behind closed doors. However, it was noted that the Japanese society had many rules and norms to guide behavior (Hrebenar, Nakainura, & Nakamura, 1998).

As Chari et al. (2007) had shown and the OECD paper of 2009 stated, there is not one single solution to regulate lobbying activities. The approaches and their characteristics are different for each country. To find the most appropriate form of regulation the legislators should keep in mind the requirements for the regulation, the experience around the globe, and the cultural and political circumstances in their country (Pross, 2007).

These different situations all over the world evolved very slowly with almost every country in the world not having any kind of regulations concerning lobbying. Even though there were only four systems with regulations, evidence for significant differences could be found. In the last decade a lot changed on this field and many more European countries adapted such regulations (Mihut, 2008; Mulcahy, 2015; OECD, 2014).

To my knowledge, there has been no research on how the regulations in the member countries of the EU differ. To give an idea what these differences might be like, I am presenting the lobby regulations in some of the countries that are covered by this study. With this part I aim to give a broad overview of the status quo in each country. The description is not complete as this would exceed the extent of this study and would distract from the main research question.

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circumstances lobbyists and officials can meet. These rules can be seen as a first step to transparency and integrity (OECD, 2014). However, the act is missing any regulation on a cooling-off period and in the recent past the general direction of governing was leading away from transparency and other democratic aspects. Poland's act includes a mandatory register (Mulcahy, 2015).

The first act dealing with regulating lobbying in Slovenia has been passed in 2011 as part of a corruption prevention bill, after some attempts on a sole lobby regulation in the 15 previous years. It includes a register, rules on what kind of information lobbyists had to reveal, what they were allowed and obligated to do, as well as sanctions. This regulations were meant to be temporary but an act exclusively on lobby activities still needs to be adopted. However, the main problem of those rules is not the quality but the lack of effective implementation (OECD, 2014). Slovenia is the only country where members of parliament are included when dealing with the revolving door phenomenon. Both Slovenia and Lithuania have written a mandatory register in their acts. These registers are combined with the most extensive requirements in terms of information that needs to be revealed (Mulcahy, 2015).

In Ireland the introduction of the regulation of lobby activities represented a huge change. In 2011 the process of developing such rules has been started. The main aim is to improve the transparency without harming the relationship between officials and the society (OECD, 2014). The act came into force in 2015 and includes a mandatory register. According to the definitions of a key term only those officials are seen as lobbying targets that are on top of the hierarchy (Mulcahy, 2015).

France implemented a new transparency law in 2013 widening the group of people for which a cooling-of period is required. France, Lithuania, and in 2015 also Ireland are part of the group of countries that have act exclusively dealing with lobby regulation. The Netherlands and France only have a voluntary register included in their regulations (Mulcahy, 2015).

In Austria a Lobbying Act entered into force on January 1st 2013. The main points are an

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(OECD, 2014). Not included is a passage to regulate the revolving door phenomenon (Mulcahy, 2015). In 2014 the United Kingdom passed an act to improve the transparency of lobbying in the already existing system of self-regulation. The major part is played by a mandatory register and the sanctions. In the UK the topic of transparency is especially important as the country aims to be on front of the international transparency movement (OECD, 2014). The UK and Austria are the only two countries that provide an online access to their registers (Mulcahy, 2015).

Cyprus is an exception in this country group as its the only nation without an act on the access to information. Thus, it belongs to the group of countries where access to information on lobbying is restricted, also including Bulgaria, Estonia, France, Hungary, Lithuania, Portugal, and Spain (Mulcahy, 2015).

To sum up, the differences in regulating lobby activities among the EU member states are very large, with Slovenia in leading position and Cyprus as taillight. But even those countries that are doing good in European comparison are facing many more challenges when being compared internationally or being evaluated by TI (Mulcahy, 2015).

A clear tendency can be seen in the EU during the past decade. More and more countries are introducing or refining their lobby regulations. Many problems can be observed in multiple countries. Even though each state has to find the right solution for its local circumstances a cooperation and knowledge exchange could help to make the developing process faster and more efficient.

Simply passing additional or stricter regulation does not necessarily improve the regulation situation. To achieve this the characteristics of the regulation need to match the purpose and the local circumstances. If there are too many or too strict regulation this could also decrease the effectiveness of the whole regulation system. Different regulations could contradict each other or too strict regulations could impede the lobby activities altogether and drive the actors in a legal gray area or illegality. This is another reason why the quality of regulation and not the amount is used as the measurement in this paper.

2.2 Culture

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life, for example in the business world (Alon & Higgins, 2005). As culture is such a complex topic, first the concept and the most important aspects of this fields are presented. Afterwards, I explain the framework of culture dimensions and indices.

The everyday use of the word culture mostly stands for music, arts, and history. It is also used to talk about the rites, values, and norms in a certain society. Hereby, it is mostly used to distinguish between countries or societies. This is the perspective on culture that I will follow in this paper.

Research has shown that national culture is a functional concept to distinguish countries from one another (Cagliano et al., 2011; Middleton & Jones, 2000; Raghuram, London, & Larsen, 2001). The differences in culture can affect the cooperation between countries. This is especially true for the EU as a unique project where countries aim to work so closely together as it has never been tried before.

Many researchers worked on this topic in the past. However, none of the many attempts to describe and define culture was successful in the sense that a universally valid definition was developed. One of the earliest authors in the modern history of this field was Edward B. Tylor (1924), defining culture in a very broad way, including “belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society” (Tylor, 1924: 1).

Most valuable addition to the perspective of culture as a distinguishing or defining factor of a society have been made since the 1990s. Granato et al. (1996) define culture as “a system of basic common values that help shape the behavior of the people in a given society” (Granato, Inglehart, & Leblang, 1996: 608). Here, the values are the prominent aspect of culture and the society with its people is influenced by the culture. A different view is that not the society is the starting point but the culture itself as "the collective programming of the mind that distinguishes the members of one group or category of people from another.” (Hofstede, 2001: 9).

As said before, culture can play an important role in the business world. Thus, there is a lot of literature that deals with the culture of organizations (Cagliano et al., 2011; Middleton & Jones, 2000; Raghuram et al., 2001). Hofstede is also part of this field. However, his work had influence beyond that part of cultural research.

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(2011). Meidinger (1987) studies another field, the regulatory culture. The author argues that different cultural backgrounds may have influence on the type of regulation as the definitions of aims, benefits or drawbacks might differ (Meidinger, 1987). This is the same conclusion as above: Cultures can be distinguished from one another and these differences should be taken into account when studying regulation. This is the connection between culture and lobby regulation as the differences between countries in evaluating pros and cons of lobbyism and regulation could be rooted on the national culture.

Others go even further and state that there are universal values around the world and that cultures can be distinguished based on their specific manifestations. The most influential authors are Rokeach, Schwartz, and Hofstede. All three created a system of values or culture dimensions that could be found all over the world and along which lines cultures could be distinguished. Rokeach included the most in his concept, with 36 values. Schwartz used ten categories and Hofstede found five. There are some aspects that can be found in Schwartz' and in Hofstede's work. Each concept has its supporters but Hofstede can be seen as the one referred to the most (Hills, 2002). The essential similarities for this paper between Schwartz and Hofstede are the aspect of power and security (Hofstede, 2001; Schwartz, 2012). Seeing cultures as connected to nations and as distinguishable from each other is a fundamental assumption in this paper. As Hofstede's framework is the most used approach and his categorization seems to be the most appropriate for this study I chose it as the starting point of developing the culture indices.

Hofstede developed an index for each of his factors out of the answers to multiple questions. The questions were part of a survey and dealt with the organization of a firm. This concept can be transferred to a general survey which includes questions to the organization of a society. In the following the relevant dimensions for this study will be presented in the way Hofstede used them (Hofstede, 2001). How they are used in this thesis is explained in the data section.

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hierarchy. Hofstede derived his definition of Power Distance in the environment of a firm but also states that it can be relevant for the family or society level (Hofstede, 2001). I am transferring the framework to the environment of a nation. The bosses would be represented by the government and other influential individuals, the subordinates by the citizens.

The second dimension is Uncertainty Avoidance, which is dealing with the uncertainty about the situation. The higher the Uncertainty Avoidance Index (UAI), the more people feel stress and the higher the importance of stable rules and employment situations. The transfer to the country level can be reasoned in two ways. On the one hand, with higher Uncertainty Avoidance the wish for many and strict rules would be there. On the other hand, a high index could also reflect the citizens' preference for a strong and stable ruler. Even if the individuals think that some regulations are missing or others should be changed they might not protest as they do not want to face uncertainty by risking the stable government (Hofstede, 2001). Individualism and Masculinity are not included in this paper. The dataset is not sufficient to provide reliable indices for them.

To sum up, I chose the culture aspects Power Distance and Uncertainty Avoidance as variables in this study as I believe them to be well reasoned as culture indices and relevant for this paper.

But how is culture connected with the regulation of lobbying? The reasoning behind different answers on this question are presented in the following sub-sections. First, the different points of view on lobbying are explained. Second, the same is done for regulation in general. In a final sub-section, I am summarizing on the relationship of culture and lobby regulation.

2.2.1 Attitudes towards lobbying

When looking at the evaluation of lobbying the focus lies on what is generally seen as ethically correct in a country. The question is what aspects of lobbying are seen as acceptable or beneficial.

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were reflected in equal relationships and the high importance of social justice. High Uncertainty Avoidance corresponded to the emphasis on individual security (Tsui & Windsor, 2001). Based on these findings, a low PD society is egalitarian and tends to give a high importance to equality and social justice. This could be connected to rejecting the idea of a powerful minority having a large influence on the general decision making in a country. Thus, a low PD country would give this potential negative aspect of lobbyism a high importance. Other countries with a high PDI are more likely to accept such a situation as they tend to take a hierarchy of power as given.

What clues can be gathered on the different attitudes towards lobbying when looking on the differences between countries' lobby regulations in chapter 2.1.3? Taking the example of Japan, Hrebenar, Nakainura, and Nakamura (1998) found that the presenting of gifts to officials had the status of a normal thing to do, so that it was not thought to be illegal or immoral. This was seen as a cause of the bribery problem Japan had in connection with lobbying.

On various levels the evaluation of lobbying can be connected with the underlying national culture.

2.2.2 Attitudes towards regulation

Regulation can be seen as harming or beneficial. On the one hand, a regulation can be perceived as a restriction of the freedom of an individual or a corporation. On the other hand, it can be valuable for the whole society by preventing unwanted behavior. Moreover, it can also be an improvement for the individuals affected of the regulation as it gives clear rules for the behavior on this specific market (Baldwin et al., 2012). That can decrease interaction costs.

The general perspective that culture has an influence on the type and the development of institutions was stated many times (Tabellini, 2008; Williamson, 2000). Others argue that culture and institutions are interdependent and influence each other (Alesina & Giuliano, 2013; Hofstede, 2001). This argument was often based on historical examples (Alesina & Giuliano, 2013; Greif, 1994). I believe the interdependence to be true but will focus on the direction of culture influencing institutions. The field of lobby regulation is relatively new and so it is unlikely that it already affected culture. Thus, the approach of a single influence direction is feasible for now.

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Avoidance can be associated with many and strict regulations (Gray, 1988; Hofstede, 2001; Milberg, Burke, Smith, & Kallman, 1995). Such a strong legal framework gives the individuals a feeling of certainty and security. They know what to expect. However, this could go on up to an extent of regulations that harms effectiveness of the rules in total. So that the sole number of regulations might rise but not necessarily the quality.

Arguments for this line of reasoning is provided by the theories of regulation. These include that the failure of regulations can, among others, be caused by “Contradictory or overlapping objectives” or “Interdependence between elements of the regulatory structure” (Guerin, 2003: 6). These problems are likely to occur more often if there are more regulations that could get in conflict with each other. This is another reason why I use quality benchmarks for the lobby regulations and not the amount of laws and regulations.

As a high score in the PDI is connected to high inequality and low trust, this could lead to a wish for more or better regulation in order to be protected from the behavior of the others that you do not trust (Milberg et al., 1995). In the same direction leads the argument that high PDI societies tend more to base their cohabitation on formal regulations. In contrast, a low PD society is functioning based on cooperation, trust, and equality. This is seen as a given situation that does not need to be fixed by regulations (Hofstede, 2001).

Another paper suggested the connection between the culture dimensions and secrecy. Here, secrecy can be seen as an opposite to transparency. The line of argumentation from the perspective of the ones who regulate is as follows. With high UAI scores the individuals do not want to make certain information public in order to keep a stable situation and prevent disputes and rivalry (Gray, 1988). High UAI societies could be associated with a tendency towards a negative relationship with the transparency aspect of regulation.

Regulations and culture are connected on many levels.

2.2.3 The relationship of culture and (lobby) regulation

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country and its society. Secondly, the opinion on regulations in general. The main tendencies here can be either to prefer as much regulations as possible in order to have a clear rule for every situation and be able to know what the rules of the game are. The other extreme is to want as much freedom as possible, rules are restricting and harm more than they are of use.

As Hofstede stated, culture and institutions shape and reinforce each other (Hofstede, 2001). The important topics in a society are likely to become the top of the political agenda (Kirkman, Lowe, & Gibson, 2006). Taking the example of Japan again, there were small changes to be seen that could lead to more regulation in the years to follow the study (Hrebenar, Nakainura, & Nakamura, 1998). The Japanese social norms and their habit of gifting are part of their culture. Thus, the studies results are evidence that culture can have influence on the regulation of lobbying activities.

As the European continent and especially the EU is seen as a region with relatively many and diverse cultures I find it necessary to look at its possible relationship with such an important and current topic as the regulation of lobby activities. Based on the previous argumentation, the assumption in this paper is that the different regulation approaches in the European countries can be measured by the quality of the regulations and that these are rooted in the cultural differences between the EU member states.

It can be argued that the public trusts the government and thereby the lobbying activities as long as it feels close to them and see them as equals. This is represented by a low PDI. When this is not the case, the attitudes towards the authorities can change. With a higher Power Distance the citizens cannot influence the political decisions as easy as with a closer connection. The lower the Power Distance is, the more are all others seen as equals and the more the individuals trust that they will be treated according to that without further regulation. Lobbying is be seen as a normal interaction which does not need special regulation. If this assumptions of the society are true would need to be tested by looking on the actual lobby activities not the regulations. These cultural assumptions might influence the lobby regulation even if they should not be true in reality. Thus, the higher the PDI score the more skeptical is the population towards the government and the higher is the quality of lobby regulation that is required.

Hypothesis 1a:

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Societies with high Uncertainty Avoidance prefer more or better regulations. However, as the measurement in this paper is the quality and not the amount of regulations another perspective needs to be considered. There can be a point when there are so many regulations that they hinder each other more than supporting their original aim. The regulations are failing (Guerin, 2003) so that a higher UAI score could lead to a decrease of the quality if regulations.

Hypothesis 1b:

The higher the national score of UAI, the lower the index of overall lobby regulation.

A low PD society is functioning based on cooperation, trust, and equality. As everyone is on the same level, it is likely that information is also expected to be distributed equally. Thus, there is no need for better transparency regulations as lobbyist are on the same level as their lobby targets and the rest of the citizens. The lower the PDI score, the less transparent are the lobby regulations.

Hypothesis 2a:

The lower the national score of PDI, the lower the index of transparency in lobby regulation.

High UAI scores represent societies where a stable status quo is preferred to an unknown and potentially risky change. In order to keep the current situation, information is not shared (Gray, 1988). The citizens should not be encouraged by new information to support a change. Even if transparency would not be considered to be a threat to the stability of the status quo, high UA societies would prefer many strict and detailed regulations. These would be likely to hinder each others performance and lead to a lower quality in terms of transparency.

Hypothesis 2b:

The higher the national score of UAI, the lower the index of transparency in lobby regulation.

Following the same line of argumentation as before, a society with a low PDI score expects everyone to be integer as all are on the same level and can be controlled by each other. Additional regulation is not considered to be necessary to secure integrity.

Hypothesis 3a:

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Here again, the stable status quo could be more important than the quality of regulations. As soon as integrity of regulations might destabilize the current situation it could be prevented. On the contrary, a low Uncertainty Avoidance society could be more likely to promote integrity as the fear of a risky change of the situation is not important here. Moreover, the argument of too many regulations hindering each other in a high UA society is also valid for integrity.

Hypothesis 3a:

The higher the national score of UAI, the lower the index of integrity in lobby regulation.

Similar to the argumentation for hypothesis 2a, the equality of access is considered to be the status quo so that no regulations are necessary. Everyone is seen to be equal and has equal access to everything in the country's organization.

Hypothesis 4a:

The lower the national score of PDI, the lower the index of equality of access in lobby regulation.

Here can be reasoned again, that the securing of the current situation is the most important thing for a high UAI society. In addition, the high amount of regulations that is likely in such a country, is expected to decrease the quality of the regulations.

Hypothesis 4a:

The higher the national score of UAI, the lower the index of equality of access in lobby regulation.

After developing the hypotheses, I present the database in the next section.

3. Data

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enough period to look for alternative databases. This argument can be rebutted with the findings of Beugelsdijk, Maseland, and van Hoorn (2015). The authors found that the culture indices do change over time but that the differences between countries are relatively stable, so that the regression results should be similar for culture indices over time. How the indices were developed is described in detail in the method section.

The ESS has been conducted regularly since 2001 and has the status of the European Research Infrastructure Consortium (ERIC) since November 2013 (ESS, 2016a). The founding is done on a yearly basis by all participating countries (ESS, 2016b). The data is gathered by conducting interviews. The study aims for an effective sample size of 1,500 in general, exceptions are countries with a very small population were the aim is 800 interviews of person over the age of 14. Each country had its own national coordinators and its team of interviewers, of which everyone is required to be trained and experienced in face-to-face interviews (ESS, 2009). For this study the data from the fifth round in 2010 was taken as the questionnaire provided the most appropriate items to measure the culture dimensions.

The ESS recommends to weigh the data. Following their advice I choose the post-stratification weights and exclude Austria from the sample as these weights are not available for it. By weighting the data with this information the sampling error and the non-response bias can be corrected so that all individuals have the same change of being represented in the survey. The sample is now representative for the whole country (ESS, 2014).

The ESS only provides data for individual countries and was not designed to construct an index on EU level by taking the average of the ESS data (ESS, 2014). Thus, I do not include the EU level in the general regression but take the scores of the quality of lobby regulation and compare them to the country scores. This might also provide some indications.

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international standards. Each item could receive a score from 0 to 2. The scores were conducted by gathering information through primary and secondary data as well as talking to 180 lobbyists, policymakers, and experts in this field. For the final score of a country or dimension all scores were added and the percentage to the maximum score was calculated. This percentage is the score value. During this procedures no weights were applied to any item, country, or institution (Mulcahy, 2015).

As said in the previous sections, I aimed for researching the relationship of culture and lobby regulation in the EU as a whole. Nonetheless, I found no database covering every EU member country. Thus, the sample is smaller than intended but still covering the majority of the countries (see Appendix table B1 for a list of countries). The first restriction came from the ESS as it is the only survey, to my knowledge, that covers such a large amount of European countries in a single survey. The aspect that the survey was coordinated by one organizer is very important. If this were not the case, the data of the different countries would be difficult to use for one index as the data might have been gathered in different ways coming to different results. However, the survey is still not covering all EU members. The second restriction was the data on lobby regulation. Again it is the only dataset of this completeness covering this amount of countries that I know of. Here, I had to choose between a larger sample and the more detailed and more reliable data from TI. I chose the latter as the alternative would have been to gather all the information myself. I could have tried to gather all the information that the TI dataset includes but this would have likely resulted in an incomplete and weak dataset. The gathering of this information demands a lot of time, resources, and profound knowledge and experience with this kind of information. With all of this I expect TI to be better equipped. Moreover, the ESS survey questions are being changed from round to round, 2015 was the first time that the Lobby regulation index was determined, and the samples of these two indices did not match perfectly. Thus, only a sample of 16 countries can be used for the regressions.

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4. Methodology

In order to get indices that can be seen as representing Hofstede's dimensions, a few requirements have to be met when using the ESS database.

First, I chose three questions for each dimension that are covering the same aspects as Hofstede's IBM questions did. A list can be found in the Appendix A. Second, the three aspects are supposed to add up to an index value, thereby confirming each other. This can be ensured with a high intercorrelation between them. These criteria were chosen in accordance with Minkov and Hofstede (2014), who replicated the UAI. A similar approach was chosen in order to receive a valid PDI.

Four of the six indicator questions were recoded in order to ensure that the highest value also represented the most Power Distance or Uncertainty Avoidance. For the original and the recoded version see the Appendix A.

In short, the PDI is representing how much trust the individuals have in the national parliament (b4), how much influence the respondent was allowed to have in the organization's policy decisions (f28), and how important the possibility to use one's own initiative in the job was evaluated (g65). For the UAI the respondents were asked if they agreed that tall laws should be strictly obeyed (d35), how often they had felt calm and relaxed (g2), and how important the security of their job was for them (g66).

The indicators were formed by using the factor analysis with the principal-factor option. In order to test if the questions are forming one index value their correlation is tested and Cronbach's alpha is calculated. For the calculation of the indices the whole sample of the ESS was used with 27 countries. I expect the indices to be more robust when using the larger sample. After processing the data as described, the hypothesis can be tested with this general model:

LOBBY*i=β1+β2*PDI+β3*UAI+β4*CONTROL+ε,

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The variable LOBBY* represents in different models the total quality of the regulations as well as the three sub-categories transparency, integrity, and equality of access.

The CONTROL variables. Population density (people per km²) are expected to influence regulation in general. The higher the population density the more or better regulation in general is needed to provide a peaceful society. As more people are living close together the likelihood of conflicts and disagreements rises because people come in contact with each other more often. As the individuals are used to more general regulation they are also likely to prefer more or better regulation on the field of lobbying.

Another control variable is the wealth and income situation of the country, measured in GDP and GNI per capita in current US dollars as average of the years 2010 to 2014. These measures are supposed to account for the economic aspects of a country's development. For other aspects of these developments the GINI coefficient and the Gender Inequality Index (GII) are used.

These variables are used to control that the differences in the lobby regulation are not due to the differences in the economic development. An explanation for such a relationship could be that developed countries tend to have more bureaucracy.

I used a stepwise approach starting with the culture indices, combined and on their own, and then adding different control variables. As the sample is on the small side I did not include more than three explanatory variables in the same model. The models are regressed with a simple Ordinary Least squares (OLS) method.

5. Results

In the first part of this section I present the results of the calculation of the culture indices and the results of the regression model. In the second part the results are discussed.

5.1 Variables and regression

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were calculated for the 27 country sample of the ESS (see Appendix table B1) to get a stable index even though some countries were taken out of the final sample due to mismatches between the data sources.

The correlations for the PDI index were all significant at the 5%-level and had these values: b4 and f28: 0.69 (0.0001)

b4 and g65: 0.39 (0.0452) f28 and g65: 0.48 (0.0109)

The other measure was Cronbach's alpha. This represents the interrelatedness of the three indicators. It can be seen as a measure of the internal consistency. It can take values from 0 to 1. The value for the PDI index was 0.59.

The correlations for the UAI index lay between 0.54 and 0.59, all were significant at the 1%-level.

d35 and g2: 0.59 (0.0013) d35 and g66: 0.55 (0.0031) g2 and g66: 0.57 (0.0021) Cronbach's alpha had the value of 0.78.

The factor analysis provide only one factor each with an eigenvalue larger than 1. Moreover, the factor loadings for the UAI are all above 0.7, the ones for the PDI are 0.75, 0.8, and 0.54 for b4, f28, and g65 respectively. The uniqueness for the variables was ranging between 0.46 and 0.51 for the UAI and between 0.35 and 0.71 for the PDI. Even though the values for the g65 indicator could be seen as critical, the remaining criteria gives the impression that the chosen indicators are a reliable calculation case for the culture indices.

For a better understanding, I rescaled the results to range between 0 and 100. So, the interpretation is that the country with a score of 100 has the highest score in this sample. In table 1 the results for the two cultural indices are listed. It can be seen that the Netherlands have the lowest PDI as well as the lowest UAI. Lithuania ranks high with both indices. Bulgaria has the highest Uncertainty Avoidance and ranks fourth on the PDI score.

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lobby regulation to PDI and UAI, respectively.

The results of the regression are presented in tables 2 and 3. In the table 2 the dependent variables are the total and the transparency score, table 3 includes the regression results with the integrity and equality of access scores. I found indications that PDI has a positive influence on the total quality of lobby regulation. The coefficient is significant on the 10%-level if it is controlled for population density in combination with UAI or GNI per capita in current US dollars. The control variables are not significant. This gives support or hypothesis 1a.

In contrast, a support for hypothesis 1b could not be found. There were no significant results regarding the UAI. This was also the case for the model with equality of access as dependent variable, hypothesis 4b.

The result for PDI with the transparency score as dependent variable was similar to the one presented above. The coefficient was also positive and the impact was about the same size. This result could be found for those models where the UAI, the GNI or the GDP controls were included, which again were not significant. These result can be seen to support hypothesis 2a.

Table 1: PDI and UAI country scores

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The same can be said for hypothesis 2b. However, this was only the case when I controlled for the GII in combination with the PDI. The influence in the transparency of lobby regulation was negative as I expected and significant at the 10%-level.

With integrity as dependent variable significant results were only found for UAI, so no evidence in support of hypothesis 3a. These results supported the assumption made in hypotheses 3b and presented a negative coefficient. The significant results were provided by the same models as for transparency.

For the PDI significant results were found with equality of access as dependent variable. Hereby, the population density and the GNI controls were important again. These results can be seen as support for hypothesis 4a.

5.2 Discussion

I found evidence supporting most of my hypothesis. They are consistent throughout the models. The controls for income or wealth, population density, and inequality seem to be important for the relationship between cultural indices and the quality of lobby regulation.

However, it has to be kept in mind that the sample is small. The coefficients are only significant on the 10%-level and do not reach this level of significance if they stand alone in the model. Moreover, the control variables ave influence on the model but are not significant.

The test for heteroskedasticity and multicollinearity did not show any sign of these problematic characteristics. The values of R-squared in combination with the AIC and BIC scores provide no evidence that one of the models should be preferred to the others.

As robustness test I took other calculations of cultural indices and calculated their correlation with the indices in this paper. First, I took the Minkov and Hofstede paper (2014) that I based the development of the UAI on. The second source is a work from (Beugelsdijk et al., 2015) who replicated Hofstede's dimensions for two birth cohorts.

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Table 2: Regression results – Total score and Transparency

(1) (2) (3) (4) (5) (6) (7)

Total1 Total2 Transpa-rency1 Transpa-rency2 Transpa-rency3 Transpa-rency4 Transpa-rency5 PDI 0.353* 0.361* 0.389* 0.303 0.435* 0.398* 0.386* (0.192) (0.202) (0.197) (0.220) (0.220) (0.219) (0.205) UAI -0.161 -0.318* -0.383* -0.243 (0.150) (0.175) (0.190) (0.227) Population density 0.0369 0.0429 (0.0407) (0.0411) GNI per capita

current US$ 0.000214 0.000233 0.000515 (0.000287) (0.000431) (0.000343) GDP per capita current US$ 0.000525 (0.000319) Gender Inequality Index 2011 84.66 (93.76) Constant 13.79 -1.160 18.79* 12.96 6.243 -11.23 -11.06 (16.60) (17.64) (10.11) (12.05) (25.43) (19.61) (18.23) R-squared 0.254 0.218 0.265 0.312 0.282 0.214 0.236 AIC 126.5 127.3 133.3 134.3 134.9 134.4 133.9 BIC 129.6 130.3 135.6 137.4 138 136.7 136.3

Standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1. The column titles specify which variable was used as independent variable: either the total score of quality of lobby regulation or the transparency score. Population density, GNI, and GDP are presented in means of 2010-2014.

Table 3: Regression results – Integrity and Equality of Access

(1) (2) (3) (4) (5) (6)

Integrity1 Integrity2 Access1 Access2 Access3 Access4

PDI 0.160 0.122 0.402* 0.407* 0.366 0.371* (0.152) (0.174) (0.202) (0.191) (0.209) (0.205) UAI -0.244* -0.273* 0.0206 (0.135) (0.150) (0.158) Population density 0.0717 0.0695* 0.0756* 0.0783* (0.0429) (0.0379) (0.0403) (0.0418) GNI per capita

current US$ -0.000171 (0.000292) Gender Inequality Index 2011 37.09 42.84 (74.01) (73.41) Constant 35.09*** 32.54*** 1.164 2.207 -3.276 7.629 (7.802) (9.516) (17.50) (14.95) (17.99) (17.92) R-squared 0.202 0.218 0.268 0.267 0.287 0.287 AIC 125 126.7 128.2 126.2 127.8 127.8 BIC 127.4 129.8 131.3 128.5 130.9 130.9

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used in this paper is correct. The differences to the Beugelsdijk et al. scores show that calculating culture dimensions is not an exact science but needs a lot of reasoning and assumptions. Nonetheless, I take this results as a confirmation of my results and leave a further evaluation of the development of cultural indices to future research.

I find the regression results to be conclusive even though they do not seem to be very strong as some changes in the model lead to insignificant coefficients. The general conclusion I draw on the basis of these results is that culture seems to have an influence on the quality of regulations.

Countries with a higher Power Distance also tend to have a higher quality over all and in particular more transparent regulations and a less unequal access to the decision-making process. Following the argumentation in the sections above, with a low PDI the society will consider lobbying to be a normal interaction between equals. The main drawback of lobbyism is mostly seen as the influence taking behind close doors, the general attitude that everyone is on the same level makes this situation unlikely in a low PDI society. The other relationship that I found was that a higher Uncertainty Avoidance seems to be correlated with less transparent and integer lobby regulations. Here, the reasoning was that high Uncertainty Avoidance societies tend to have so many regulations that the quality in terms of transparency and integrity is decreasing.

The comparison of the country scores for lobby regulation with those of the EU institutions provide an interesting result (table B2 and B3). The lobby regulations for the institutions seem to be of a higher quality than those of the countries on average.

This could be explained with the fact that a lot of lobbyism is concentrated at the EU-level (Mulcahy, 2015). The general structure if the EU is often described as confusing and complex. Thus, it is more likely that it is considered to be necessary to such processes. In addition, it can be argued that countries with a higher national standard are promoting their models also on the EU level. The Council of the EU with the representatives of the governments is often not included in regulations of the EP and the EC.

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appear to have a better quality of their lobby regulation than the mean of countries.

6. Conclusion

The countries in the EU are still very different in many aspects. One is the quality of lobby regulation. As the influence of lobbying is increasing in the EU, and especially on the EU institutions level, the question is if an integration or harmonization is possible. This is important in order to create equal circumstances for the democratic processes on national and European level. One important factor for the development of differences in lobby regulation could be the national cultures.

Based on the culture indices Power Distance and Uncertainty Avoidance I found evidence that culture has influence on the quality of lobby regulation. For the PDI a positive relationship to lobby regulation quality was found. This was the case for the total score, the transparency, and the equality of access category. The regression results also provide hints towards a negative relationship between the UAI and transparency as well as integrity of the regulations.

So, I found evidence that culture has influence on the quality of lobby regulation and should be seen as one factor that needs to be considered in the future. When developing new or changed regulations or when a European harmonization is discussed on this field cultural aspects should be integrated in the concepts.

Some might say that cultural differences hinder the integration in the EU. A complete alignment of all rules in all countries might not be feasible but culture can still be an important and helpful factor on the road to further regulatory integration. As I concluded in section 2, regulations need to be adjusted to the countries characteristics in order to be effective. This has to be considered when designing new EU directives.

When considering the EU level, intelligence from all countries should be collected in order to find the best type of regulation for the EU institutions. This seems to be on a good way for the EP and the EC. The situation of the Council is relatively unsatisfying and should be improved.

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makers are aware of the cultural differences and how these are influencing the lobby regulations, this knowledge could be used to actively work on a coordination of the national regulations. Trying to find the lowest common denominator as a consensus and work from their towards more coordination.

For the specific field of lobbying, it is especially important that the right type of regulation on all levels is found in order to enable this important part of the democratic process and prevent the drawbacks, such as biased decision making due to asymmetric influence. This would also help to improve the acceptance of the citizens for this part of the political decision making process.

Limitations and future research

A general limitation of this paper is the sample size. The maximum amount of countries could be 28 when concentrating on EU member states and around 40 when relaxing this restriction. At this point in time a panel dataset is not available as the first regulations of lobby activities were only recently installed in the EU. Nonetheless, future research could gather more information on the quality of lobby regulation in the remaining European countries. In addition with more cultural data on these countries the sample could grow significantly. Moreover, other culture indices could be studied in order to find out if they also have a relationship to the quality of lobby regulation. This could be done with other Hofstede dimensions, such as Individualism and Masculinity, or with categories developed by Schwartz or Rokeach.

Another potential aspect that could be interesting for future research is the evaluation and comparison of previous cultural indices. Part of this could be the testing of the different models in different papers with the culture indices from other researchers. This could provide insights in the robustness of each result and the general validity of culture indices. It might also forward the discussion about which survey and what kind of questions are the most appropriate to build culture indices.

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The second identified limitation is that in previous literature it is already found that managers have more opportunities to perform earnings management in case of

Lastly, this study contributes to the corporate governance and agency theory literature by exploring the moderating effect of a CSR committee on the

Finally figure 10 shows the expected payoffs for the different regulation methods. The first general point we see is that when b=0, or in other words when we look solely at

Since schools tend to be the first environment where children with complex learning difficulties and disabilities are identified (Millar, Thompson, Schwab, Hanlon-Dearman,

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