Burden or benefit? The contradictory influences of regulation on small businesses - John Kitching, SBRC.


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Burden or benefit? The contradictory influences of regulation on small businesses - John Kitching, SBRC.

  1. 1. Burden or benefit? The contradictory influences of regulation on small businesses John Kitching Enterprising regulation? event, Kingston University, November 8, 2013
  2. 2. Research context  4 main types of study: • perception surveys • compliance cost studies • cross-national surveys • qualitative studies  some problems: • too focused on firm-level perceptions • assumption that regulation imposes only burdens, costs, constraints • static focus - limited consideration of dynamic effects & enabling influences • exaggerate adverse impact of regulation
  3. 3. Regulation defined The legal and administrative rules created, applied and enforced by Government regulatory authorities – at local, national and transnational level – that both mandate and prohibit actions by individuals and organisations, with infringements subject to criminal, civil and administrative penalties.
  4. 4. Routes of regulatory influence direct indirect Customers Suppliers Competitors Infrastructure providers Regulatory authorities SMALL BUSINESS
  5. 5. Regulation generates contradictory effects  effects contingent upon exercise of agency by small firms and their stakeholders  regulation a dynamic influence, simultaneously: • enabling action – eg property rights & contract; regulation stabilises market agents’ expectations • motivating action – minimal compliance or compliance plus • as well as constraining action – substantive, administrative, psychological costs & burdens  so: no single ‘small business effect’  awareness of regulatory effects partial – always more than business owners (or we) can see, become taken for granted
  6. 6. Small company financial reporting  small companies can choose to file full or abbreviated accounts at Companies House  both confidentiality and public disclosure potentially serve small company interests: • personal/business privacy • access to resources & markets  opportunity costs associated with both alternatives: • possible gains in lighter administrative burden & privacy have to be offset against… • costs of confidentiality, often unperceived (eg prospective clients might not approach or offer trade credit), especially in uncertain times  implications for adoption of ‘Micros Directive’ (2012/6/EU)
  7. 7. Impact of Part P building regulations  electrical contractor - 10 staff, £900k t/over, profit break-even  indirect constraining impact of regulation: • Part P regulations requiring residential electrical installations must be tested by a ‘competent person’ • 5 qualified staff quit on the same day • employer had to go ‘back on the tools’ to cover contracts & use more temporary workers • less time spent on winning new business
  8. 8. Conclusions and implications  no single ‘small business effect’ - regulation generates multiple, contradictory effects via direct & indirect routes  managing these contradictory effects is the normal condition of doing business  policy – all regulatory interventions impact small firms in multiple, contradictory ways, unintended consequences are endemic