Exploring Differences: How SMEs Respond to Environmental Regulation

Interview data from a sample of manufacturing small and medium enterprises (SMEs) confirm, at an aggregate level, that traditional regulation is an important driver of environmental behaviour. Further analysis, however, shows that, in addition to this aggregate picture, there are groups of firms that respond to regulation in different ways. Moreover, alongside the aggregate and group level pictures, differences exist across individual firms. Thus, SMEs respond in different ways to regulation, despite there being sufficient similarities across clusters of firms that we can group them thematically into “populations” (or groups of individual firms). These differences are explained by firms having different ‘capacities’ and ‘orientations’, which determine their receptiveness to different regulatory arrangements. This is important for at least three reasons. First, it provides a more sophisticated account of SME regulatory behaviour than existed formerly. Second, it helps us to understand more fully why a one-size-fits-all approach will not work and why specific regulatory measures may underperform. Third, it provides a basis for reshaping approaches so they can better accommodate different rule-following conduct.