Regulatory Compliance when the Rule of Law Is Weak: Evidence from China's Environmental Reform

Abstract

What drives regulatees' behaviors when the institution of law is weak? This study seeks to answer the question by examining environmental regulation enforcement in China. Based on survey and interview data on Hong Kong-owned manufacturing enterprises in the Pearl River Delta Region, Guangdong Province, we found that their decisions to adopt basic and proactive environmental management practices were less driven by concerns for legality than by their perceptions of the regulators' actions and gestures. Enterprises adopted basic environmental practices to avoid potential punishment and more proactive practices to avoid potentially arbitrary impositions from regulatory officials. Regulated enterprises were more likely to adopt both basic and proactive environmental practices if they had less difficulties in understanding the enforced regulations. These findings suggest important ways in which regulatory compliance behaviors in a developmental context may differ from those in Western countries.