Corporate Behavior, Environmental Regulation Constraints

The environmental result is beyond question the primary target of environmental regulation. However, with the strictness of environmental constraint owing to the scarcity of environmental resources, the impact of environmental regulation on firm's competitiveness has evolved into an important factor, which constrains the result of environmental regulation. The main concern of the thesis is to investigate how the environmental regulation influences the firm's competitiveness and how the regulated firm reacts to the environmental regulation. The investigation will lay emphasis on the factors and the transferring mechanism from environmental regulation to competitiveness. The intention of the research is to promote the establishment of robust environmental regulation, which is deeply rooted on the analysis of the behavior of the polluting firms.The research begins with the profit-maximizing decision model of the neoclassical firm theory. And the environment comes into the model as a new production factor that is just like the traditional labor and capital factors. The cost of using the environment input depends on its price and quantity, which are directly or indirectly subject to the environmental regulation. Based on such recognition, the thesis put the environment, environmental regulation and firm's behavior into a compatible theoretical framework.The research fulfills its framework by establishing the Environment-Competitiveness Matrix (ECM) and Augmented Environment-Competitiveness Matrix (AECM) with the employment of industrial organization theory and game theory. By ECM and AECM, the research recognizes the main factors through which the environmental regulation will have effects on firm's behavior and performance. The cost, product differentiation and regulation implementation are among the main factors which the thesis laid more emphasis on. Only by virtually and suitably affecting the factors could a certain kind of environmental regulation change the firm's behavior and decision to achieve its expected aims. The potential implication...