Negative Compliance as an Organizational Response to Legal Pressures: The Case of Japanese Equal Employment Opportunity Law

Scholars have conceptualized the interaction between law and organizations as a game of tug-of-war in which organizations try to protect those internal operations regulated by law. This suggests that organizations are likely to substantively comply if symbolic compliance alone is insufficient. This conceptualization, however, cannot capture a radical response: organizations may stop interpreting legal demands or protecting their internal operations and simply leave the game. In this case, they change their internal operations in order to disengage from the law. I term this negative compliance. In this paper, I identify conditions under which this occurs and demonstrate the unexpected consequences. Analyzing panel data on corporate responses to Japan's equal employment opportunity law and its revision, I show that after the revision strengthened the law, firms followed one of three paths: substantive compliance (hiring more women); symbolic compliance (no change in hiring practices, effectively protecting sex segregation); or negative compliance (externalizing female labor and hiring even fewer women). I discuss the implications of negative compliance, which is likely to be an increasingly common corporate response to regulations.