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Market governance mechanism

Market governance mechanisms (MGMs) are formal or informal rules that have been consciously designed to change the behaviour of various economic actors - including individuals, businesses, organisations and governments - to encourage sustainable development.

Well known MGMs include fair trade certification, the European Union Emission Trading System and Payment for Ecosystem Services (PES).

MGMs, meanwhile, are not to be confused with market-based instruments, for MGMs, as a group, includes command and control regulations as well as regulatory economics. As such, MGM is a broader classification.


The term "market governance mechanism" was used by Baysinger and Butler in 1985 in their paper on the role of corporate law in the theory of the firm.[1] Then, Amashi et al., used the term to discuss the role of corporate social responsibility in correcting market failures.[2] And more recently, Shaping Sustainable Markets, a research initiative from the Sustainable Markets Group at the International Institute of Environment and Development, uses the term widely and have created a typology[3] to frame its work on the sustainable development impact and effectiveness of MGMs.


  1. ^ [1], Baysinger, B. and Butler, H. 1985. The role of corporate law in the theory of the firm. The University of Chicago.
  2. ^ [2][permanent dead link], Amaeshi, K., Osuji, O., Doh., J. (undated) Corporate Social Responsibility as a Market Governance Mechanism: Any implications for Corporate Governance in Emerging Economies? University of Edinburgh.
  3. ^ Blackmore, Emma (May 2011). "Shaping Sustainable Markets: Research Prospectus" (PDF). International Institute for Environment and Development. Retrieved 2012-03-09.