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Towards a better understanding of SME responses to environmental regulatory pressures

The University of Manchester, PhD by Published Work, 2018 For several reasons, small and medium enterprises (SMEs) are an important group of firms. In most market economies SMEs contribute significantly to wealth and job creation, economic growth, and product and service innovation. At the same time, SMEs are said to produce environmental impacts that are significant and that need managing and regulating. Their importance, from an economic and environmental perspective, is reflected in the fact that SMEs have become an established subject for research, with a distinct area of analysis focusing on how they manage their environmental impacts. Despite considerable interest in this area, aspects of their behaviour are in need of further examination, for there are still misunderstandings and gaps in knowledge. An area where gaps exist is how SMEs respond to different forms of environmental regulation (e.g., command-based or market-based approaches) and different forms of regulatory pressure (e.g., such as those pressures from civil society that might induce compliance-related activities or market forces that might flow through, and affect, the value chain). Why the gaps? On the one hand, and generally speaking, a common claim among those who have considered issues affecting smaller firms is that regulation is an important driver of environmental behaviour. There is a well-documented set of linked claims and empirical findings that smaller firms tend to be motivated by compliance with regulatory standards, yet owing to their scarce resources can find themselves hovering on the edge of compliance. Typically, SMEs will attempt to do no more than the law requires of them. They tend not, as it were, to go beyond compliance. Of course, this is an important observation - one that might say much, even if indirectly, about the motivations and intentions of smaller firms. It might indicate that SMEs, rather than addressing environmental issues, are more concerned with making cost savings and efficiency gains, or with satisfying the requirements of customers over such matters as product or service quality and delivery. While significant, there are at least three reasons why this view remains incomplete as an explanation for the interaction between SMEs, regulation and the environment. Firstly, this view tends to over-homogenise smaller firms. By treating them as a standardized group, the inference is that SMEs view and respond to regulation - i.e., they are all driven by regulation - in a broadly similar way. Secondly, it says little about how and why regulation drives behaviour. Claiming that regulation drives behaviour is helpful, but the claim is unduly narrow and leaves several important questions. In what ways does regulation drive behaviour? Does regulation drive all smaller firms in the same way? Thirdly, and finally, it suggests that different forms of regulation drive SME behaviour and that different forms of regulation drive this behaviour in broadly similar ways. That is, it is incomplete as it lacks appreciation of the widening scope of regulation and governance, and the nature of smart mixes of regulation. It fails to properly consider whether and how SMEs might respond differently to command-based regulation, market- or information-based measures, or self- or so-called civil regulatory pressures. On the other hand, and again in general terms, while those who have examined regulation have looked at how it can influence firms, they have tended to pay too little regard to how firms of different size may respond to different approaches or to how the factors and characteristics relating to size may shape the effectiveness of regulation. SMEs particularly are often discussed as an unusual sideshow that might raise different issues in relation, say, to the impacts of regulation on performance or innovation. That we often pay too little regard to how firms of different size may respond raises difficulties, particularly given our increasing understanding that there is no guarantee that a particular instrument will work in all situations. In other words, we are becoming more aware of the fact that the effectiveness or ineffectiveness of regulation is likely to be context-sensitive, and that the size of the enterprise is likely to be an important determinant of context. This thesis does take, and provides evidence for, the view that the organisational context is crucial to understanding how regulation functions. The thesis does not claim to provide all answers, but it does adopt the position that, in aggregate terms, a firm's size, or the factors that can be associated with size (e.g., resources, skills, knowledge, visibility, profile, stakeholder relations), and related factors concerning a firm's mind-set, can affect two things; first, the types of regulatory influences that may affect organizational behaviour and, second, how firms will respond to those influences. By focusing on SMEs, the thesis in some ways reinforces the dominant view that regulation is a driver of behaviour. Nevertheless, it goes much farther than this by showing, both theoretically and empirically, that there are important differences across SMEs and that these differences determine how and why they respond to regulation. It extends the common view by showing how SMEs differ not only in terms of the types of regulatory influences that shape their behaviour, but also in terms of how they react to these different influences. The emerging picture thus shows that the responses of firms are determined by their particular characteristics. The term used in this thesis is 'receptive capacity', which is shown to be a composite measure that includes the capabilities (e.g., resources, skills, knowledge) and orientations (e.g., views) of firms. It is suggested here that the range of receptive capacities across firms is enormous, since no two firms will be identical. Yet, it is argued - and demonstrated - that firms can be grouped according to certain identifiable characteristics, and that these groups of firms will respond to regulatory pressures in broadly similar ways; that is, there are groups of firms that have broadly similar resources and broadly similar worldviews. Thus, as well as suggesting that differences can be found at the micro level, it is demonstrated that there are sufficient commonalities across some firms that we can understand them as groups - groups of individual firms with some common characteristics. In conclusion, it is the differences across firms that provide us with a more sophisticated view of how SMEs are influenced by, and respond to, regulation. It is the nature of differences that is the main contribution of this research to both the fields of regulation and organisational and management studies. It is suggested finally that these differences have implications for how we design regulation, for how we may expect regulation to work or indeed not work, and for issues such as regulatory complexity and smart mixes.

Identiferoai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:764706
Date January 2018
CreatorsLynch-Wood, Gary
ContributorsHarris, Neville
PublisherUniversity of Manchester
Source SetsEthos UK
Detected LanguageEnglish
TypeElectronic Thesis or Dissertation
Sourcehttps://www.research.manchester.ac.uk/portal/en/theses/towards-a-better-understanding-of-sme-responses-to-environmental-regulatory-pressures(d6d0c2ad-3d82-492a-b574-fc3d1f5060b6).html

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