Network relationships and standard adoption: diffusion effects in transnational regulatory networks

Abstract

The soft law measures that transnational regulatory networks produce have become increasingly important in regulating cross‐border market activity. However, domestic agencies vary considerably in terms of the rate by which these soft law measures are adopted, and the ways in which they spread across jurisdictions are not well understood. This article argues that existing theoretical explanations referring to socialization or power dynamics have a specific network‐structural pattern associated with them, and that longitudinal network analysis can be used to test their hypothesized effects. In particular, we study the widespread adoption of the International Organization of Securities Commissions’ (IOSCO) Multilateral Memorandum of Understanding (MMoU). Based on a longitudinal dataset (2002–15) of the inter‐agency relationships between securities regulators (n = 109), we use Stochastic Actor‐Oriented Models (SAOM) to predict the rate at which transnational standards are adopted by domestic agencies. The results indicate that standard adoption is contagious in the network of securities regulators.