A Question of Perspective - impact assessment and the perceived costs and benefits of new regulations for SMEs

This paper contributes to the debate on the impact of government regulation on small firms by considering some of the underlying factors that influence the economic decisions of business owners and policy makers. Regulation has remained a contentious topic between small firms, policy makers and scholars. Business owners and their lobbying organizations claim that regulation acts as a deterrent to economic activity (see for example Ambler, Chittenden and Iancic 2009, SBRT 2006, 2007, 2008). In contrast policy makers and some scholars have argued that regulation creates net benefits for society (BRE 2009) or has a modest or even positive impact on SMEs (van Stel, Storey and Thurik, 2007; Kitching 2006. 2007). This is an empirical paper that examines the contrasting decision making criteria used by small business owners (based on survey data) and policy makers (based upon government guidelines). The paper argues that differences in the objective decision making criteria (algorithms and heuristics) that are regarded as appropriate to the circumstances of each party provides at least a partial explanation of why their views appear irreconcilable. Currently it is perceived that each views the other with negative emotion and distrust. This paper argues that both parties are acting rationally in pursuit of higher goals and are not simply “gaming” in order to gain the greatest personal advantage as is sometimes suspected. However, continued failure to recognize and respect each other’s position is likely to be detrimental to the intended outcomes. The implications of this analysis are that both policy makers and business owners would benefit from reflecting on the differences between the environments in which they operate and the consequences that this ecology has for their interpretation of each others’ objectives and actions. Policy makers may wish to consider, e.g. in the process of Impact Assessment, how the achievement of policies could be better adapted to take account of the rational analysis conducted by business owners