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Abstract
In this paper we argue that the cost or impact of regulation is not determined solely by the regulation itself. It is mediated by the capability of business owners to manage regulation. Building on face to face, in-depth interviews with 111 small business owners and a further twelve key informants, we explore the factors and processes that influence small business capability to manage regulation and investigate the relationship between the capability to mange regulation and compliance with regulation.
PROBLEM FORMULATION
The impact of government regulation on businesses is an important policy concern for economies worldwide (European Commission 2010). The attention given to the annual World Bank's Doing Business reports (World Bank 2010), which attempts to measure the "ease of doing business" is just one manifestation of that policy concern.
It is accepted that regulation is necessary to provide stable trading conditions and develop levels of business trust which can benefit SME development (Atherton et al 2008, Welter and Smallbone 2006), yet the nature of the regulatory burden may affect SME competitiveness and productivity (Kingston University 2005).
Much of the empirical evidence on the impact of regulation on businesses is based on quantitative data on business owners' perception of regulation as a burden or on compliance cost studies that aim to quantify the administrative cost of regulation for businesses and their owners. As a result, it has been argued that regulation is mostly a cost or constraint for businesses, particularly for those small businesses for whom the burden of regulatory compliance is perceived to be too high given their limited resources (Kitching 2006, Baldwin 2004).
In this paper we argue that the cost or impact of regulation is not determined solely by the regulation itself. It is mediated by the capability of business owners to manage regulation. The capability to manage regulation does not appear to be homogeneous across all small businesses. For example, where case studies have been undertaken, they have revealed that some small business owners are better able to manage regulation than others (Ram et al 2003). This could be because of differences in a business owner's awareness of regulation (Yapp and Fairman 2005), different attitudes towards regulation (Vickers et al 2005) or a business owner's capacity to discover, interpret...