Why did they comply while others did not? : environmental compliance of small firms and implications for regulation

Abstract

This doctoral dissertation aims to offer new insights into the environmental compliance behavior of small firms (SFs). Specifically, the dissertation examines the impacts of two categories of factors. The first category concerns internal motivations that drive SFs' decisions to comply or not comply with a formal environmental regulation. The other comprises external factors that affect formation of SFs' perspectives on rule compliance. Rule compliance behavior results from complicated webs of both economic and social factors. Nevertheless, existing regulatory enforcement strategies have focused heavily on rational/economic factors without considering the significant effects of interactions between the two and consequently failed to produce the behavior they seek. Starting from an examination of the crucial characteristics of SFs that distinguish them from large firms, the dissertation sheds light on how social factors affect SFs' views on economic factors such as the price of penalty and compliance costs/benefits. In so doing, it contributes to knowledge of how formal regulatory enforcement can alter SFs' environmental compliance behavior. The regulatory programs in Massachusetts and southern California targeting the dry cleaning industry are excellent cases through which to evaluate the central issues of SFs' compliance.

(cont.) The two programs are comparable in that regulatory requirements are equally strict; formal sanctions are equally severe; and regulated groups are similar in cultural background and other sectoral aspects. A notable difference is that there was a sudden rise in compliance rates in Massachusetts as compared to southern California. The comparative case study draws on ethnographic analysis based on participant observation, in-depth interview data and surveys. Unlike scholarly works in the traditions of deterrence theory and the theory of norms which depicted compliance behavior as a function of either a strict cost-benefit calculation or of a sense of moral obligation to obey the law, respectively, my dissertation portrays compliance as a configuration of regulatory relationships between regulated entities and regulators, with trade associations playing a steering role. In so doing, the dissertation suggests how regulatory policies can alter SFs' choices of actions to best encourage compliance. With a redefinition of the role of government, the dissertation proposes strategies for institutional arrangements that create and sustain reflexive trust, and thus expand SFs' willingness, opportunity and capacity to comply. The dissertation is a pioneering study examining dynamic interactions between economic and social factors in the context of regulatory enforcement.

(cont.) It will contribute to both rule compliance and regulation theory by advancing several principles not clearly delineated in existing theories. Considering the large cumulative impacts of SFs on the environment and human health, effective regulatory enforcement is crucial. A better understanding of SFs' motivations for compliance will assist agencies to meet this challenge.