Do Regulatory Compliance Costs Hinder Growth among Small and Medium Enterprises in the Philippines?

27 Pages Posted: 16 Jun 2020

See all articles by Jamil Paolo Francisco

Jamil Paolo Francisco

Asian Institute of Management

John Paul Flaminiano

Asian Institute of Management Policy Center

Joshua Uel Abad

affiliation not provided to SSRN

Jose Gerardo Santamaria

Asian Institute of Management

Date Written: May 22, 2020

Abstract

Do burdensome regulatory environments inhibit firm growth? In this paper, we analyzed the effects of regulatory compliance in terms of time and money costs on the probability that a Small and Medium Enterprise (SME) can grow. We also tested whether the relationship between regulatory compliance and firm growth is affected by firm age. Using a sample of 590 SMEs in Metro Manila, Metro Cebu, and Metro Davao in the Philippines, we found that while additional time spent on regulatory compliance decreased the probability of growth among SMEs in general, additional monetary costs in proportion to total business costs spent on regulatory compliance decreased the probability of growth among younger firms with less than five years of operations. Additionally, SMEs that were more familiar with new developments in the regulatory environment and were able to take advantage of recent technological improvements in regulatory procedures were more likely to have grown than those that were not able to take advantage of such. Our findings suggest that the government must continue to work towards easing the burden of regulation on firms, especially younger, smaller businesses whose potential as engines of economic growth and job creation is undermined by time and money costs of compliance.

Keywords: government policy and regulation, firm performance, SMEs, Philippines

JEL Classification: G18, L25

Suggested Citation

Francisco, Jamil Paolo and Flaminiano, John Paul and Abad, Joshua Uel and Santamaria, Jose Gerardo, Do Regulatory Compliance Costs Hinder Growth among Small and Medium Enterprises in the Philippines? (May 22, 2020). Available at SSRN: https://ssrn.com/abstract=3607837 or http://dx.doi.org/10.2139/ssrn.3607837

Jamil Paolo Francisco

Asian Institute of Management ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

John Paul Flaminiano (Contact Author)

Asian Institute of Management Policy Center ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

Joshua Uel Abad

affiliation not provided to SSRN

Jose Gerardo Santamaria

Asian Institute of Management

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

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