Adoption of Voluntary Environmental Standards: The Role of Signaling and Intrinsic Benefits in the Diffusion of the LEED Green Building Standards

We examine the role of signaling and of intrinsic benefits in the adoption of the individual elements of the voluntary LEED (Leadership in Energy and Environmental Design) standards for green buildings. We use goodness-of-fit tests on data for all 442 LEED certified buildings and find that neither signaling nor pursuit of intrinsic benefits can independently explain the observed adoption pattern, but that a combination of the two factors can. We also find tentative evidence that the adoption decision is made sequentially: organizations first choose a level of certification (consistent with signaling), and then choose how many LEED elements to adopt given their chosen level of certification (consistent with pursuing intrinsic benefits). We relate our findings to some open questions in the literature on diffusion of technology and draw implications for the design and the future development of similar voluntary standards and eco-labels.