Governing the common firm: The evolution of environmental policy for small businesses in India

Small firms present a conundrum for policymakers in many developing countries. On the one hand, their low capital requirements, relatively high labour productivity and high employment make them a very attractive proposition, especially in those contexts where they can serve as a major source of export earnings (Beck and Demirguc-Kunt, 2006). On the other hand, the very flexibility and informal character of their structure and operations generate challenges when it comes to regulating them, especially in countries where other governance challenges abound, which often end up with greater incentives for many small enterprises to stay hidden in the shadow economy. From an environmental standpoint to the extent that small firms are associated with manufacturing, packaging or other forms of material processing, they are significant multi-point sources of pollution that are often difficult to track, license or regulate (Blackman, 2000).