Some entrepreneurs argue that government oversight is expensive, others think it helps spur innovation and flush out companies with a low likelihood of success.
In our questionnaire format, the influences and obstacles to performance, including those associated with regulation, can be investigated in more depth. Responses on the impact of regulation offer detailed information on potential causal forces; in ways that no perception survey or compliance cost analysis will.
Health and Safety
For most entrepreneurs, health and safety is the last thing on their minds, but when they take care of this, it can help ensure a healthy working environment. Ergonomics and data security to mental health and risk management services, investing in these translates into an integrated corporate wellbeing strategy that ensures the safety of employees while also gaining trust with stakeholders.
It is government departments who set and enforce regulations in the business environment, drafting legislation to regulating industry standards, conducting inspections, and imposing penalties if anyone breaks it.
Environmental regulations not only reduce air pollution (thereby protecting human health and countering climate change), they can also raise production costs by compel companies to buy pollution-control devices or retool production. Multi-plant companies could shift production to low-regulatory plants and close the more expensive ones – raising prices and driving down productivity overall.
Productivity
This is the regulatory world that includes government regulations, industry regulations and compliance requirements which affect the business practices. It consists of policies ensuring competitive integrity and consumer protection, as well as food safety regulations, financial reporting, anti-discrimination and minimum wage laws, that influence business practices. Companies need to keep abreast of changes frequently to avoid the penalties for violations.
Regulators too strict or inflexible undermine innovation, hinder investment and undermine competitiveness within an economy, impair economic diversification and hinder growth. They also raise threats associated with under-representation of women and indigeneity in economies.
What affects business investment will depend on how much regulation costs, and whether innovations can counteract these costs through innovation-related gains in production efficiency. Research into Porter’s theory has shown that innovation-related increases in production efficiency can even negate the costs of regulation in the name of increased competitiveness – especially if the regulations are imposed equally on a market.
Trade
Trade abroad, sell assets, hire workers, run plants and facilities and run plants and facilities rely all on a stable regulatory environment that upholds intellectual property rights, minimises excessive taxes and ensures safety of workers and the public. Laws vary across countries and can require special knowledge to interpret.
Regulators can also dictate or impose norms on behaviour (“command-and-control” regulation), adjust incentives (“incentive” regulation), or regulate preferences through preference shaping regulation. Government regulations can include restrictions on pollution in the environment, minimum wages/work hours, zoning/development permits, food safety standards and quality controls on pharmaceutical products.
Regulations bring direct and indirect costs to businesses, with small businesses in particular. Large companies with the resources can pay lawyers and specialists to perform compliance for them; how much a company can offset is dependent on its ability to find a way around the regulations; such as by creating exceptions to make up for some “pound of flesh”.
Investment
There are so many factors which influence the business investment decisions, including the regulatory environment. An organization’s capacity to invest and grow depends on the way that regulation affects its investment choices; excessive or overly burdensome regulations can stifle growth while other frontiers of development advance.
Regulated factors can be impactful across nations and sectors, such as certain jurisdictions having higher license requirements for a company’s entry into specific markets, thereby making the process of conducting business expensive.
A ruleset should be transparent and technical-informed. – Small firms must also have an opportunity to speak up and give public comments on new ideas and attend public hearings – so government can make rational decisions based on objective facts, without racialized bias.
Some regulation must protect consumer and business interests: restrictions on pollution, minimum wages, safeguards against unfair competition and unfair trade practices. They have more value than their compliance expenses in and of themselves.
