Technovation 23 (2003) 939–948

www.elsevier.com/locate/technovation

A review of the literature on environmental innovation

management in SMEs: implications for public policies
Jesús Ángel del Brı́o, Beatriz Junquera ∗
Facultad de Ciencias Económicas y Empresariales, Avda. del Cristo, s/n 33071 Oviedo, Asturias, Spain

Abstract

The aim of this article is to collect and make up the most important contributions in the economic literature in relation to the
special characteristics of the management of the environmental innovation in the SMEs. Specifically, we want to show their strengths
and weaknesses in order to make up the main conclusions of these analyses with the literature in relation to the way Public
Administrations face this situation. The scarce development in the SMEs in respect to their environmental strategy may be a
consequence of the links among some of the following factors: limited financial resources, the type of organizational structure, a
little influence of the strategic adaptation competence against the changes in the SMEs, the managers’ scarce environmental training
and short term orientation, the staff’s scarce environmental awareness and training, the status of the environmental issues in the
company, the SMEs’ lower ability to obtain highly radical innovations, the scarce influence of manufacturing process flexibility in
the most advanced states of the environmental strategy in the SMEs and their lack of relation ability with external stakeholders—
very important in the success of the most advanced environmental approaches. Besides, the lack of regulation neutrality must be
added as a key difference among companies of different sizes. So specific actions seem be necessary, such as technological advice
and awareness, and training programs in order to cooperate with external stakeholders.
 2002 Elsevier Ltd. All rights reserved.

Keywords: SMEs; Environmental management; Public administrations

1. Introduction was held in April 1997 under Danish chairmanship, and

In the last few years a lot of prominence has been
attached to the analyses related to the companies’
environmental management, considering its multiple
dimensions. However, studies of this sort, specifically in
relation to small and medium-sized enterprises (SMEs),
are very scarce, practically non-existent. On the other
hand, with respect to the demands made by their
environment, it seems as if these types of companies
enjoyed a privilege or ‘bull’.
Nevertheless, some events are fostering a change in
this situation precisely in the most demanding area of the
planet in environmental matters: the European Union. It
all started in the Informal Environment Council, which
∗
Corresponding author. Tel.: +34 98510 4972; fax: +34 98510
3708.
E-mail address: beatrizj@correo.uniovi.es (B. Junquera).
which addressed the problem of environmental manage-
ment in SMEs.
This report concluded that SMEs are an important
driving force for economic growth and employment
throughout the European Union. But, on the other hand,
it is observed that they generate a great deal of the
environmental contamination. As a consequence, the
requisites demanded of them should be related to the
nature and magnitude of the environmental contami-
nation, and not to the company’s size (Berends et al.,
2000). This is not a novelty, since previous positions
of the Council had shown its concern about this issue,
expressing, in any case, the need to simplify the environ-
mental legislation regarding these companies.
However, these observations of the Council are not
supported by objective information, since not even in
the European Union are data available of the pollution
produced by SMEs. In any case, the recent regulations
about Integrated Pollution Prevention and Control

0166-4972/$ - see front matter  2002 Elsevier Ltd. All rights reserved.
doi:10.1016/S0166-4972(02)00036-6
940 J.Á. del Brı́o, B. Junquera / Technovation 23 (2003) 939–948
(IPPC) (European Union, 1996) have among their objec-
tives, the carrying out of a pollution record.
Thus, and taking into account the predictability of a
stronger environmental requirement, it is necessary to
determine the SMEs’ peculiarities in their determination
to face the environmental management problems, as well
as to suggest useful mechanisms for it. However, the
literature on business management has not cared much
about this question (Noci and Verganti, 1999), due to the
limited demand perceived from the SMEs with respect to
their environmental duties. In fact, it has been observed
that the strategic management literature is concerned
about the analysis of large companies and rejects analy-
sis of the SMEs’ peculiarities (Noci and Verganti, 1999).
Even so, some writers already mention this area specifi-
cally and brand it as a research priority (Alberti et al.,
2000).
Therefore, this work intends, in the first place, to col-
lect and integrate the most relevant contributions of the
economic literature with respect to the peculiarities of
the SMEs’ management (specifically, to analyse its
strengths and weaknesses faced with the need to put into
practice new environmental approaches). Subsequently,
we will analyse the literature concerning the way the
Public Administrations may respond to such a situation.
Finally, the integration of both types of research will
lead to drawing practical implications for managers and
Public Administrations, as well as to the discovery of
new methods of research.
2. SMEs’ environmental strategy alternatives
The strategic consideration of the environmental
issues can be carried out on the basis of the concept of
corporate environmentalism, defined as the process by
which companies manage environmental issues and
develop environmental management strategies
(Banerjee, 2001). However, such processes differ sub-
stantially among companies.
There exist numerous classifications of environmental
strategies. They run from the more reactive, whose only
aim is to comply with the legislation, through, to the
more proactive, which perceive environmental conser-
vation as a source of opportunities rather than a problem
to be faced at minimum cost. Some companies do not
even respond in any way from an environmental point
of view, sometimes because they do not feel external
pressures.
Nevertheless, in this work we are interested in
delimiting the environmental strategies characteristic of
SMEs, since some analyses suggest that the company’s
size is a factor that may influence its environmental
option (Azzone et al., 1997b). There are various studies
concerning this aspect. Thus, Florida (1996) and Bianchi
and Noci (1998) find out, by means of a classification
of the companies, that the SMEs are the less environ-
mentally advanced. In the same way, Remmen (2001)
verifies that most Danish companies are SMEs and that,
even though the external pressures increase progress-
ively, their environmental strategy continues to be
merely a compliance strategy. In general, most empirical
studies agree with Remmen (2001) and suggest that the
SMEs’ environmental approaches are characterised by
their limited development. In fact, the strategic environ-
mental management literature is based on models that
predict that the environmental factor does not represent
an important guide for strategic changes in SMEs, and
neither will it in the future. Only environmental regu-
lation, and the ecological market, together with other
external forces, exercise pressure, so that the companies
adopt adequate environmental approaches (Azzone and
Noci, 1998a; Noci and Verganti, 1999).
Nevertheless, we can distinguish degrees within this
situation. For example, Brockhoff et al. (1999) carried
out a typology in relation to their environmental strategy
among 106 German and North American companies.
When they established the different groups’ profiles,
they found that SMEs usually adopt strategies they call
escapist, in the sense that when environmental press-
ures—regulatory or provoked by stakeholders or
environmentally aware groups inside, but mainly, out-
side the company—become stronger, these SMEs are
forced to enter new markets. Other studies, although
inside this same trend, characterise the SMEs by slightly
more advanced strategies. Azzone et al. (1997a,b), for a
small group of companies, as well as Azzone and Noci
(1998a)—in an intensive analysis of 15 companies—
found out that SMEs still adopt reactive strategies. They
include, above all, reactions to external stimuli from
‘green’ movements, governments, regulators or other
companies, especially other SMEs that operate in sectors
where they only receive weak signals of the environmen-
tal requirements expected of the market. Sroufe et al.
(2000) also showed, by means of a case analysis, that
SMEs were far behind, reactive and had as their aim
compliance with regulations more frequently than the
larger companies. Another case analysis (Noci and Ver-
ganti, 1999) show that the SMEs’ environmental action
determinants are external factors (all types of regu-
lation—and not only direct regulation—the social con-
sciousness, the clients, the suppliers, the competitors, as
well as other diverse groups). As their determinants are
not explicit, and are generally intermingled with the cli-
ents’ demands, the environment is not a strategic issue
for them, although on some occasions it has an impact
on the economy and the company’s forces and, in other
cases, constitutes its long-term means of survival.
In fact, North (1992) suggests different environmental
strategy solutions according to the company’s size, also
considered valuable by other writers (Russo and Fouts,
1997; Aragón, 1998). In this respect, it is argued that
 J.Á. del Brı́o, B. Junquera / Technovation 23 (2003) 939–948
the large company has more resources and higher econ-
omy of scale, which favours the search for innovations
in the environmental field (Greening and Gray, 1994;
Russo and Fouts, 1997), apart from the fact that it is
possible that society may observe them with greater
attention (Pfeffer and Salancik, 1978; Scott, 1992;
Greening and Gray, 1994). The result is that they have
more favourable effects on the achievement of competi-
tive advantages. In accordance with this, Marcus (1984)
defends that action differences according to size are due
to the fact that large companies usually have the neces-
sary resources to adapt to pressures, while SMEs ignore
or conceal the environmental effects of their activity.
The basic question on this point is what will happen
when SMEs also have to face the environmental chal-
lenge at the same level as large companies, as seems to
be the immediate intention of some Public Adminis-
trations (Berends et al., 2000). Then, two answers will
be basically possible. The first of them is that of non-
compliance due to incapacity, assuming the conse-
quences such a position may bring with it, bearing in
mind that it could even mean the momentary or defini-
tive closing down of the company’s installations. The
second position would be to face the challenges, but for
this the SME must have a series of resources. Therefore,
it is essential to recognise the SMEs’ environmental
weaknesses, as well as possible action paths internal and
external to the companies. In order to know those spe-
cific circumstances, first, we will define them.
3. Determining factors of the environmental
strategy in SMEs
Some writers have shown in their work how the
attempts to incorporate the biophysical environment in
the theory of the organisation come basically from two
areas of research (Banerjee, 2001; Sarkis, 2001). The
first of them is based on a cross-disciplinary approach
and analyses the paradigmatic implications of including
the dynamics of the biophysical environment in the tra-
ditional economic and management paradigms. Refer-
ences to works of this sort appear in Jacobs (1994),
Gladwin et al. (1995), Purser et al. (1995), Starik and
Rands (1995) and Egri and Pinfield (1996). However,
Newton and Harte (1997) brand this type of approach
‘evangelic rhetoric’, since they consider that such man-
agement attitudes do not mean in practice real transform-
ation of the companies’ environmental strategies. Thus,
they support the approach of a second course of research,
which examines the strategic implications of the
environmental issues for the organisations, addressing
the study to the competitive advantage which can be
derived from integrating the environmental issues into
the business strategy. In this line are included works like
those by Hart (1995), Porter and van der Linde (1995);
941
Russo and Fouts (1997) or Sharma and Vredenburg
(1998).
Thus, the latter is the predominant position among
researchers. Russo and Fouts (1997), following the
resource-based view, start from the assumption that the
same environmental strategy that internalises the nega-
tive environmental effects, may simultaneously benefit
the company, generating positive effects that are intern-
ally and privately accumulated within it. They follow
Hart’s argument (1995) that social demands, as part of
the environment, drive the companies to try to develop
unique resources when expectations exist that they will
be valuable and inimitable. In relation to this, and
although previous works differ in their results1, Russo
and Fouts (1997) prove empirically the existence of a
positive relationship between environmental perform-
ance and business profitability. Nevertheless, they add
that such an influence is greater in large companies than
in SMEs.
Nevertheless, the differences in size also affect the
environmental performance. Thus, King and Lenox
(2000), by means of a probit analysis, show a positive
relationship between the company’s size and the
environmental development. In accordance with this,
SMEs will perceive less environmental management
advantages, which constitutes a second explanation of
the lower level of development of their strategies in
this field.
The essential question is to know why, that is: Which
are the factors that condition that such a positive
relationship between environmental behaviour and
environmental performance, on the one hand, as well as
business profitability, on the other hand, differs between
companies of different sizes. The analysis of the contri-
butions of the economic literature on the matter is the
essential objective of the present paragraph.
The economic literature has recognised the influence
of various aspects on the development limits of the
SMEs’ environmental strategy. Next, we show the con-
clusions of different studies about the influence of each
one of them.
3.1. Financial resources
Azzone et al. (1997a and 1997b) and Azzone and Noci
(1998b) show that SMEs are companies with limited
financial resources. Therefore, they cannot develop long
processes of competence accumulation, not even allocate
funds to ecological initiatives or the secondary aspects
of the company’s main activity. This lack of resources is
1
In any case, these works were undertaken with small samples of
companies, did not have reliable indicators of profitability and those
relative to social responsibility were very questionable (Russo and
Fouts, 1997).
942 J.Á. del Brı́o, B. Junquera / Technovation 23 (2003) 939–948
an element hindering the development of environmental
improvements (Noci and Verganti, 1999).
3.2. Organisational structure
Some studies have shown that, among the difficulties
SMEs encounter to implement environmental actions,
are the peculiar characteristics of their organisational
structure. Several elements of this confer an advantage
on larger companies over SMEs with regard to environ-
mental protection.
In general, it is easier to implement these practices in
companies with a standardised and well structured
organisation, like the larger ones (Alberti et al., 2000).
However, SMEs usually have more capacity than
larger companies when it comes to adapting to changes
in the environment (Sroufe et al., 2000). This is
important, since some empirical studies point out its stra-
tegic relevance. This is shown by Azzone et al. (1997b),
with a small sample of companies. For his part, Aragón
(1998) finds out, by means of a regression model, that
this capacity influences the development of the compa-
nies’ environmental strategy. However, the research
studies carried out on the matter show that the SMEs’
managers are afraid that, with the adoption of environ-
mental actions, companies may lose part of their flexi-
bility. Nevertheless, Alberti et al. (2000) point out that
it should not necessarily be like this, since an advanced
environmental management would make the organis-
ation more efficient, even when it comes to reacting to
unexpected events. Nevertheless, despite the positive
effects of such capacity to develop programs and manage
environmental issues quickly, the reality shows that
SMEs are less developed from an environmental per-
spective than larger companies (Alberti et al., 2000).
An explanation is provided by Noci and Verganti
(1999), to the effect that the reaction capacity to the need
for change derived from small size, makes the SMEs’
managers think that it is easier to face the environmental
challenge by means of reactive and implicit actions.
Nevertheless, such reactive capacity only facilitates
incremental changes, providing marginal advantages
when facing the multidimensional nature and the broad
scope of environmental innovation. This would serve as
an explanation of the apparent contradiction found by
Alberti et al. (2000).
3.3. Management style
Although it has been a field very much neglected by
the economic literature, some studies have recently
started to consider the influence of leadership styles on
the environmental management (Bansal and Roth, 2000;
Cordano and Frieze, 2000; Egri and Herman, 2000;
Flannery and May, 2000; Sharma, 2000; Banerjee, 2001,
among the most relevant ones). However, these studies
have not been specifically applied to SMEs. The scant
studies that refer to these aspects in smaller companies
show contradictions regarding whether there exist
characteristics typical of the SMEs’ managers which
may affect the environmental result or whether, on the
contrary, this is not so.
Nevertheless, most works defend the existence of
characteristics specific to the management style in SMEs
that influence the companies’ environmental develop-
ment, sometimes indirectly. Azzone et al. (1997a) note
that the SMEs’ environmental managers adopt a com-
pliance with the legislation attitude. This is either
because of lack of information—poor level of manage-
ment capacities, even of perceived control2 (Azzone and
Noci, 1998b; Noci and Verganti, 1999)—or due to their
limited strategic capacity in this field—a short-term
orientation (Bianchi and Noci, 1998; Noci and Verganti,
1999), which does not provide incentives for improving
the environmental performance (Azzone and Noci,
1998b).
Besides, the managers’ environmental training is to a
certain extent a determining factor of the level of devel-
opment of the companies’ environmental strategy
(Azzone and Noci, 1998b). In fact, Noci and Verganti
(1999) point out that a reactive strategy is a feasible
option in companies with merely a high availability of
technical and management competences. Other studies
support this relation. Brı́o (1999) finds significant differ-
ences depending on the managers’ level of environmen-
tal training with respect to the level of development of
the companies’ environmental actions. In consequence,
the higher the percentage of managers trained in this
area, the greater the development of the companies’
environmental approaches. These empirical works show
that the possession of certain skills on the part of the
managers is a necessary condition for environmental
development, even enough up to certain levels. Never-
theless, it needs additional resources in the more
advanced environmental development stages.
Moreover, other characteristics of the management
attitude explain the companies’ environmental develop-
ment performance. Sánchez (1997) demonstrates empiri-
cally that the SMEs’ managers perception of the environ-
mental pressures as a threat makes the innovations less
radical, which is considered to be able to influence their
competitive capacity. This is like saying that SMEs’
managers avoid exploiting the competitive advantages
associated with the ecological activity. It would explain
their reactive strategic attitude, and causes a reduction
in competitiveness, both with respect to their clients and
also other stakeholders (Noci and Verganti, 1999).
2
The manager’ s perception that he can reach the objectives set in
accordance with his aptitudes and the overall resources provided by
the company.
 J.Á. del Brı́o, B. Junquera / Technovation 23 (2003) 939–948
Anyhow, the research in this area does not allow the
acceptance of these results as definitive. As opposed to
them, Theyel (2000) shows in an empirical analysis car-
ried out for chemical companies, that the level of devel-
opment of the environmental approaches is not determ-
ined by the differences in size, but by the sophistication
of the plant managers’ knowledge. Thus, these results
show contradictions, since from Theyel (2000) we can
ascertain that the management style is not influenced by
size. It is independent of it, and therefore there would
not exist a fixed profile of the SMEs’ managers.
3.4. Human resources
Environmental management is intensive in human
resources and depends on the development of tacit skills
through the employees’ involvement (Cramer and Roes,
1993; Klassen and McLaughlin, 1993; Hart, 1995;
Berkel et al., 1997; Hanna et al., 2000).
Azzone et al. (1997a) and Azzone and Noci (1998b)
observe that the SMEs’ employees usually have a very
low level of environmental awareness. This comes on
top of a limited training in this area. This has been
proved in some empirical studies for several countries,
like the one carried out by Brı́o (1999) for Spanish
industrial companies. Moreover, this study analyses the
existence of significant differences, depending on the
employees’ level of environmental training with respect
to the companies’ level of environmental action develop-
ment. So, the higher the percentage of employees trained
in this area, the higher the development of the compa-
nies’ environmental approaches. Combining all the
approaches, we can conclude that the lower level of
environmental awareness and training of the SMEs’
employees and their influence on the achievements in
this area are relevant causes of the lower level of
environmental development of this type of company.
3.5. Environmental management status
The way of organising a company’s environmental
protection is controversial. The creation of a
post/department with environmental responsibilities
(shared or not with others) is an idea increasingly put
into practice by companies. However, their role, some-
times, is questioned (King, 1995). In fact, it is argued
that a clear delimitation of the organisational structure
and the environmental competences is vital to achieve a
correct environmental management in the company
(Weldford and Gouldson, 1993).
When judging the different approaches, most of the
literature shows a preference for the creation of a
post/department with environmental responsibilities.
However, the company has to implement the adequate
mechanisms in order to be successful. In consequence,
all the personnel can have some type of environmental
943
responsibility (Sadgrove, 1991; Beaumont, 1992; Ledg-
erwood et al., 1992). So, the company that dedicates a
specific post/department to these questions attaches more
importance to the environment, even more if this
depends directly on the senior management (Elkington
et al., 1991; Sadgrove, 1991; Weldford and Gouldson,
1993). On the other hand, there exists an empirical con-
trast in some works (Aragón et al., 1998; Sharma, 2000).
In addition, it is believed that independently of technical
capacitation criteria, the legitimation the appointment
may suppose in the company’s culture is not an irrel-
evant issue (Aragón et al., 1998).
However, despite its advantages, Azzone et al.
(1997b) point out that the lack of an organisational unit
with the specific objective of managing environmental
issues, which most SMEs lack, could make the develop-
ment of the most advanced environmental strategies
impossible.
3.6. Manufacturing activity
Azzone et al. (1997b), by means of the analysis of a
small group of companies, have shown that relatively
simple manufacturing processes, which characterise
SMEs, allow the company to observe the context evol-
ution before adjusting its course of action.
In fact, this flexibility of the manufacturing process
has been shown in other analyses as a way of supporting
a company’s strategic answer faced with the environ-
mental pressures (Klassen and Angell, 1998). Neverthe-
less, in this analysis certain reservations are expressed.
In the first stages of the environmental development, the
specific capacities and the experience necessary to put
into practice flexibility effectively support the efforts to
reach a fuller integration of the environmental issues into
the manufacturing strategy and, therefore, into the design
of the natural environment protection approach
(Newman and Hanna, 1996). However, in the later
stages of environmental development, the influence of
the manufacturing flexibility decreases. As a peculiarity
of the SMEs, Klassen and Angell (1998) show that the
influence of flexibility faced with external pressures is
stronger in SMEs than in larger companies. Neverthe-
less, this may be the consequence, not of their size, but
of the environmental strategies that characterise them.
3.7. Technological approach
The companies with more environmentally advanced
approaches require a large amount of resources of a
diverse nature. SMEs have difficulties in obtaining fin-
ancial and human resources, among others, with the pur-
pose of tackling their business activity. They find it dif-
ficult both to introduce and obtain benefits from
944 J.Á. del Brı́o, B. Junquera / Technovation 23 (2003) 939–948
technologies with preventive approaches3 or from
‘green’ products, with the result that their technologies
are usually basically out of control4 (Azzone et al.,
1997a).
3.8. Innovative capacity
Sánchez (1997) analyses the conditions under which
environmental pressures affect the degree to which the
companies’ innovations are radical, including size
among such analysis factors. Such a positive relationship
induces the influence of size on the companies’ competi-
tive capacity as a consequence of their innovative
activity, in favour of the large ones.
In the first place, Wood (1986) had already noted that
larger companies make a bigger research effort and,
therefore, their environmental innovation levels are
higher. In addition, Marcus (1984) suggests that compa-
nies of different sizes differ according to how their
environmental innovations are. Such an influence
depends on the range of the problems, on the Public
Administrations’ behaviour and the company’s incli-
nation to cooperate, mainly.
Various reasons support this argument. In the first
place, it is more likely that large companies will have
an R&D department formalised, given the structural dif-
ferentiation associated with a larger organisation (Blau,
1970). This department will be in an adequate position
to transform competences and, as a result, will bring
about more radical process and product innovations
(Leonard, 1984). On the other hand, the innovation
options created by the environmental pressures favour
large companies when they force SMEs to leave the mar-
ket (Birnbaum, 1984; Bartel and Thomas, 1987).
Intensity in R&D is a factor suggested by Sánchez
(1997) as a mediator in the relationship between
environmental pressure and radical innovation, since it
has been empirically proved that companies with a
higher level of intensity in R&D innovate more fre-
quently in a radical way (Clark and Fujimoto, 1989).
The companies that, apart from a considerable research
effort, have an adequately integrated department will
recognise its express purpose to solve problems, such as
environmental problems. Thereby, the most advanced
and most competence-modifying technologies will
emerge as a result of R&D activities (Rogers, 1983).
Sánchez’s (1997) study demonstrates empirically that
the SMEs’ low intensity in R&D and the lack of central-
isation of the information concerning the research effort
in a unique department are factors that have an influence
3
Technologies that do not produce waste or consume fewer
resources and less energy.
4
Technologies that prevent the waste from going outside the com-
pany after being produced.
on the fact that the environmental pressures produce less
radical innovations in these companies.
Nevertheless, Noci and Verganti (1999) have sug-
gested that an SME with high innovation capacity could
successfully develop a very advanced environmental
strategy. In this way, they reject the idea that companies
of a similar size will have the same type of approach
regarding environmental innovation.
3.9. External cooperation
The relation with external pressure groups is con-
sidered a priority in the development of the companies’
environmental approaches and, especially, of the new
products with a ‘green’ dimension. Many researches
have emphasised this (Starik, 1995; Dutton, 1996; Fine-
man and Clarke, 1996; Hartman and Stafford, 1997;
Azzone and Noci, 1998a; Geffen and Rothenberg, 2000;
Kitazawa and Sarkis, 2000; Theyel, 2000). However, the
environmental innovation management literature fails for
the SMEs because most of these techniques, method-
ologies and design rules to develop environmental inno-
vations imply that the company has an important negoti-
ation power over other value chain partners. The aim of
this issue is to involve them in the improvement of their
environmental result. However, this is not a usual
strength of SMEs (Noci and Verganti, 1999).
Noci and Verganti (1999) have shown that the SMEs’
limited capacity to activate new relations with the Public
Administrations, companies that provide logistic ser-
vices, research laboratories and other organisations
external to them, can be considered an obstacle for their
environmental action development.
Despite the limited capacity for external relations that
characterises SMEs, King and Lenox (2000) prove that
voluntary agreements among companies lead to environ-
mental improvements in the companies where they are
made. Thus, the difficulty with external relations would
be another disadvantage for SMEs with respect to the
environmental challenge.
4. SMEs’ specific environmental regulation needs
Aragón (1998) states that larger companies usually
enjoy more advantages when they accede to the Public
Administrations’ programmes to support the employees’
environmental training. This is so perhaps because they
have a greater capacity to impose their criteria on the
regulators (Arora and Cason, 1995). This is proved by
the fact that they take part more often in such pro-
grammes than SMEs (Arora and Cason, 1995).
Dean and Brown (1995) show that environmental
regulation is not neutral with respect to the companies, at
least as regards the difference in size. On the one hand, it
is suggested that environmental regulation affects more
 J.Á. del Brı́o, B. Junquera / Technovation 23 (2003) 939–948
considerably the SMEs, which lack the necessary
resources to face a much stricter regulation than the large
ones (Birnbaum, 1985; Ungson et al., 1985). These stud-
ies start from the assumption that the cost of finding and
interpreting the regulations and dealing with the regulat-
ory agencies is very high because it implies increasing
the level of efficient manufacturing, and generates other
additional costs.
This situation would prevent SMEs from choosing the
environmental equipment most adequate to their oper-
ations (Pashigian, 1984) and leads them to be subject to
their own economies of scale, not being able to face the
environmental requirements.
On the other hand, as environmental regulation
becomes stricter, larger companies need to make invest-
ments in new equipment to comply with the legal
requirements. This change in the use of technologies is
usually favourable to the large companies which can
adopt their technologies to the current legal require-
ments. For the SMEs, the prevention technology adop-
tion process may be more difficult, due to its own com-
plexity and the lack of economic resources (Barney,
1982).
Similarly, Porter (1980) and Scherer and Ross (1990)
identify two new disadvantageous elements for SMEs:
the technological complexity and the experience effect.
The companies exposed to environmental regulations
must cope with new political, technological, administrat-
ive and legal challenges that, inserted in the development
of their activities, give rise to more complex processes
because of the presence of multiple norms, present at all
the organisation’s levels and with the same level of
demand (Dean and Brown, 1995). This complexity has
added to the difficulties in managing the interrelations
between regulators, environmental technologies, manu-
facturing processes and administrative procedures. The
effect of the regulatory complexity can be understood by
means of the concept of the learning curve. Applying it
to complexity, this idea suggests that the more frequent
the companies’ dealings with the regulatory environmen-
tal agencies are and the larger the number of activities
to develop, the quicker the company will learn which
regulations to apply to its activities and how to control
them effectively. In consequence, it will know which
types of environmental technologies to apply to its pro-
cesses and how to use them effectively and will modify
its administrative and organisational processes to fulfil
the tasks. In other words, the learning complexity goes
at a higher cost per unit to the SMEs (Monty, 1991).
From a different perspective, it is considered that
environmental regulation may have a favourable effect
for SMEs. This effect is produced, firstly, by means of
preferential treatment to SMEs from Public Adminis-
trations, bearing in mind that their own characteristics
may be an obstacle to compliance with environmental
regulation (Greener, 1997). Secondly, this effect is pro-
945
duced by means of the simultaneous choice of manufac-
turing and environmental technologies (Dean and
Brown, 1995). In some cases, the legislators have con-
sidered it appropriate to shield SMEs from regulations
and minimise the disproportionate effects of some
environmental measures (Pashigian, 1984). So, they can
benefit from the SMEs’ regulatory exclusions or from
actions that require less legal compliance (Brock and
Evans, 1985). Likewise, the regulators may consider it
appropriate to defend the SMEs in order that they man-
age to maximise the benefits of their efforts in the
execution of these measures. So, it is likely that they
will be directed to large companies, which will probably
have more resources to undertake important environ-
mental reduction. By the same token, SMEs’ manufac-
turing flexibility allows them to achieve a greater relative
efficiency when it comes to adapting to the new environ-
mental regulations.
Nevertheless, there seems to exist some net advantage
on the part of large companies over SMEs with respect
to the environmental management support public pro-
grammes. Therefore, Remmen (2001), as Dean and
Brown (1995) had already suggested, states that the chal-
lenge consists of starting a dynamic and differentiated
regulation designed according to the companies’
environmental strategies to create new incentives that
encourage them to go beyond mere compliance with the
direct regulation. This is more evident considering that
in a lot of countries most companies are SMEs.
We must highlight the SMEs’ need for environmental
consulting, with respect to several aspects (Greener et
al., 1997). Anastas and Breen (1997) point out the
importance of lending support to SMEs in environmental
matters in order to know their information needs in clean
process technologies, with the aim of preventing pol-
lution. Once detected, the Public Administrations could
support the companies showing them comparisons in
relation to the application of different technologies of
this sort.
In the United States, as early as 1997, there already
existed a specific program for SMEs of the chemical sec-
tor, which was aimed at applying the existing experience
and leadership to inform and facilitate efforts in pol-
lution prevention. This is a type of regulation which can
be described as of voluntary approach defined by
alliances between industry and society (Anastas and
Breen, 1997).
For his part, Remmen (2001) defends that an
especially important task is to create the conditions for
SMEs to learn to include resource consumption and
emissions among their requirements towards the equip-
ment suppliers. In some Spanish regions—Cataluña and
Paı́s Vasco—there also exist support programmes to
advise SMEs in this matter (Brı́o and Junquera, 2001).
On the other hand, and taking into account the relevance
of the stakeholders or external pressure groups in the
946 J.Á. del Brı́o, B. Junquera / Technovation 23 (2003) 939–948
environmental action development (Azzone and Noci,
1998a and 1998b; Dyckhoff (2000), it would seem
reasonable to extend the collaboration to these groups
too.
5. Conclusions
The Public Administrations, especially the European
Community institutions, are starting to show interest in
the SMEs’ environmental activity, considering its
impact. However, these types of companies are used to
practically ignoring the environmental issues, and, at
most, just comply with the direct regulation that con-
cerns them. Comparably, the effects of the SMEs’
environmental regulation had been a matter rarely dealt
with by business administration research. However, if
the forecast comes true, this tendency should reverse in
the future.
The scant research carried out so far on business man-
agement in SMEs has revealed a great uniformity of
environmental strategies among them, whose common
denominator is the poor level of development. Several
studies have analysed the factors which are more likely
to condition this type of behaviour. Thus, they prevent
environmental actions from turning into a competitive
advantage for the company and, on the other hand, ham-
per environmental performance levels similar to those of
larger companies.
Among them are mentioned: the limitation of financial
resources, the type of organisational structure, the slight
influence of the SMEs’ adaptation to change capacity,
the managers’ poor environmental training and short-
term orientation, the employees’ limited involvement
and training in this area, the status of the environmental
function in the company as a whole, the SMEs’ lower
capacity to give rise to highly radical innovations, the
slight influence of the SMEs’ manufacturing process
flexibility in the most advanced levels of environmental
strategy and their lack of relation capacity with external
pressures, essential for success of the environmental
approach.
Apart from these disadvantages for the SMEs’
environmental progress with respect to larger companies,
empirical studies show that regulation is not neutral
either, but in general benefits larger companies. Never-
theless, the literature shows how the environmental regu-
lation could benefit, either larger companies or small and
medium-sized enterprises, depending on their character-
istics.
Given the lack of neutrality of environmental regu-
lation, some writers even suggest the existence of a spe-
cific environmental regulation for SMEs. This con-
clusion is fundamental for the Public Administrations,
because if their objective is to improve the SMEs’
environmental achievement. They should also consider
these aspects to design their companies’ environmental
management support programmes. Among such meas-
ures we can emphasise technological consulting, the
awareness of more preventive approaches, and infor-
mation about the relation alternatives with suppliers. In
this respect, it is interesting to note the development of
similar progress in relation to the stakeholders.
On the other hand, the conclusions drawn from this
work raise ideas about the key aspects for the success of
the SMEs’ environmental approaches, suggesting some
plans of action.
However, there are very few empirical works that
have thoroughly analysed these aspects, and we have not
found any that analyses the effects of all of them as a
whole. In addition, most of them are aimed at studying
specifically the type of most habitual environmental
strategy in SMEs in relation to large companies. But
there is no empirical study specifically related to SMEs
that analyses which factors prevent them from achieving
the same levels of competitive advantage with their
environmental actions as larger companies. However,
taking into account the fact that most of the economic
literature rests on the assumption that it is such advan-
tages that encourage companies to advance along the
environmental path, we are of the opinion that this is an
irreplaceable course of future research.
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Jesús Ángel del Brio is Doctor of Economics and Management at Univer-
sidad de Oviedo, where he has been teaching Firm Organization since
1995. His research work has been directed towards the study of environ-
mental innovation and management. Besides, he has done some studies
in environmental industry in Asturias (Spain) and analysed the implemen-
tation of ISO 14001 standard in Spain.
Beatriz Junquera is Doctor of Economics and Management at Universi-
dad de Oviedo, where she has been teaching Firm Organization since
1991. Her research work has been directed towards the study of tech-
nology management and environmental innovation and management.
Besides, she has collaborated in some studies about the environmental
industry in Asturias (Spain). She has also done some work regarding the
implementation of ISO 14001 standard in Spain.