How can government environmental policy affect the performance of SMEs: Chinese evidence

Abstract

The promotion of modern industrialization has caused heavy environmental pollution. Environmental protection is a basic national policy of China. In 2011, China began to implement the “Twelfth Five-Year Plan for National Environmental Protection” (12th FYP_NEP). Using the survey data of small and medium-sized enterprises (SMEs) in Shandong Province of China, this paper empirically explores the impact of 12th FYP_NEP on the energy utilization and operating efficiencies of SMEs. It is found that the environmental policy “12th FYP_NEP” has a significant incentive effect on both efficiency performance of Chinese SMEs, and has a greater positive impact on operating efficiency. Our heterogeneity analysis showed the following results. The incentive effect is different in different industries and enterprises of different sizes. The policy “12th FYP_NEP” has a greater positive impact on the energy utilization efficiency of SMEs in China's first and second tier cities, but it has no significant impact on their operation efficiency. This shows that SMEs in first and second tier cities are more effective in coping with the national environmental policy reform strategy. It can be seen that the promulgation of China's environmental policies can significantly improve the energy utilization awareness of these SMEs. The incentive effect of the policy on the two efficiency performances of SMEs in cities with “heavy air pollution” is greater, indicating that the implementation effect of “12th FYP_NEP” on SMEs in such cities is better. The enlightenments are as follows: the current situation of Chinese SMEs is that the energy utilization efficiency is low, while the operating efficiency is high. Most enterprises attach great importance to their own operating profits and economic development, and the awareness of energy utilization needs to be greatly strengthened. “12th FYP_NEP” has obvious positive effect on the energy utilization and operating efficiencies of SMEs, but there are slight differences among different types of enterprises. It is suggested that governments can refine their own environmental regulation standards and implement different environmental regulations for different types of enterprises, so as to enhance the performance of domestic enterprises most effectively.