Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2016
  • Chapter
  • Environmentally Responsible Supply Chains

Ignore, Avoid, Abandon, and Embrace: What Drives Firm Responses to Environmental Regulation?

By: David F. Drake and Robin L. Just
  • Format:Print
ShareBar

Abstract

A regulator's ability to incentivize environmental improvement among firms is vital in achieving long-term sustainability. However, firms can and do respond to environmental regulation in a variety of ways: complying with its intent; avoiding the regulation by offshoring or by abandoning the market; or ignoring the regulation by continuing with entrenched business practices. The path a profit-maximizing firm will choose depends, in part, on the expected cost of non-compliance, which is a product of the regulator's stated penalty, the likelihood that non-compliant practices are detected, and the likelihood that detected violations are punished. The type of regulatory regime—compliance-based or "pay-to-pollute"—and three important cost thresholds also drive firm response: i) the compliance or clean technology adoption threshold; ii) the offshoring threshold; and iii) the exit threshold. In this chapter, through examples of regulatory failures and successes, we develop a framework for understanding how these thresholds interact with the type of regulatory regime being considered and the expected cost of non-compliance to determine whether profit-maximizing firms ignore, avoid, or embrace environmental regulation.

Keywords

Sustainability; Environmental Operations; Regulation; Cost vs Benefits; For-Profit Firms; Operations; Environmental Sustainability

Citation

Drake, David F., and Robin L. Just. "Ignore, Avoid, Abandon, and Embrace: What Drives Firm Responses to Environmental Regulation?" In Environmentally Responsible Supply Chains, edited by Atalay Atasu. New York: Springer, 2016.
  • Read Now

More from the Authors

    • 2018
    • Faculty Research

    Show or Tell? Improving Agent Decision Making in a Tanzanian Mobile Money Field Experiment

    By: Jason Acimovic, Chris Parker, David F. Drake and Karthik Balasubramanian
    • 2017
    • Faculty Research

    Inventory Management for Mobile Money Agents in the Developing World

    By: Karthik Balasubramanian, David F. Drake and Douglas Fearing
    • 2017
    • Faculty Research

    Show or Tell?: Behavioral Inventory Response to an East African Mobile Money Field Experiment

    By: Jason Acimovic, Chris Parker, David F. Drake and Karthik Balasubramanian
More from the Authors
  • Show or Tell? Improving Agent Decision Making in a Tanzanian Mobile Money Field Experiment By: Jason Acimovic, Chris Parker, David F. Drake and Karthik Balasubramanian
  • Inventory Management for Mobile Money Agents in the Developing World By: Karthik Balasubramanian, David F. Drake and Douglas Fearing
  • Show or Tell?: Behavioral Inventory Response to an East African Mobile Money Field Experiment By: Jason Acimovic, Chris Parker, David F. Drake and Karthik Balasubramanian
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College