The Study Of Relationship Between Environmental Regulation And Competitiveness Of Firms

According to traditional notion, there is in an inherent dilemma between economic activity and preservation of the quality of environment. On the one hand, there are social benefits resulting from strict environmental regulation, there are, on the other hand, private costs that are inevitably incurred for enterprise in order to abate pollution and reduce environmental damage. Which in turn result in higher prices and consequently a loss of competitiveness. Entrepreneurs tend to see the environment as a threat to their activity, in so far as it imposes restrictions, limiting their freedom of action and capacity of response, and imposing additional costs that limit their competitiveness. However, according to Michael E. Porter and Claas van der Linde, it makes no sense for firms to oppose the raising of environmental standards or the introduction of environmental regulations. There are economic incentives associated with the introduction of environmental regulations that encourage a process of restructuring and innovation within firms. This inevitably has positive affects on the productivity and efficiency with which resources are used and compensates for the initial increase in costs, so that regulation end up making firms more competitive and not less. Appropriately dealing with the relationship between environmental regulation and competitiveness, not only there are important implications on our firms' competitiveness in global economy, but also there are positive significances to realize the sustainable development of economy and society.In the dissertation, Firstly, based on the challenges to and limitations to conventional theroy about the relationship between environmental regulation and firms competitiveness, analyzes the essence of pollution and effects between environmental improvement and competitiveness of firms, and it can be concluded that it is important for firms' competitiveness to improve resource productivity by innovation. On the basis of these understandings, it pointed that improving the quality of environment and improving firms' competitiveness follows the same principle. Secondly, it is concluded that environmental regulation has an important effect on firms' innovation. This is based on the view of theory of dynamic competitiveness. Finally, the paper analyzed the relationship of environmental regulation and the factors, which affect firms' competitiveness, and it is concluded that the way that firms complying with environmental question is a primary factor to firms' competitiveness, and environmental bring firms a new competitive opportunity rather than an economic burden. Not only do firms enhance total factor resource productivity by improving environmental performance, but also firms' better environmental performance, as a strategic asset, provides a basis for firms obtaining continuous competitive advantage. After that, these conclusions above are testified through case study. It is clear that environmental regulations will help to causing innovation to appear and greater competitiveness. The key question is that, government must lay a set of measures, which encourage firms to take prevented attitude to environmental question rather than counter environmental regulation. On the other hand, firms must regard environmental regulation as opportunity rather than restrict, and deal with environmental question through innovation.