Towards a Better Understanding of SME Responses to Environmental Regulatory Pressures

Student thesis: Phd


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 inc
Date of Award1 Aug 2018
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorNeville Harris (Supervisor)


  • SMEs
  • Regulation
  • Smart Mixes
  • Environment
  • Receptive Capacity

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