An empirical investigation of strategic compliance decisions in Argentinean polluting firms

In choosing environmental compliance levels, firms make strategic decisions based on their expectations about how the intensity of the scrutiny they face from enforcement agencies will respond to their own - and perhaps others' - environmental performance. The objective of this paper is to provide insight into those expectations in Argentina - what they are and what influences them - and to interpret the results in the context of compliance incentives in developing economies. We report results based on a large-scale survey of polluting firms in Buenos Aires, Argentina. Amongst other things, we find that industry concentration, the social vulnerability of the surrounding community, and pessimistic attitudes to the general effectiveness of government regulations and/or about society's commitment to the environment weaken expectations of compliance externalities. On the other hand, beliefs in the competitive advantage of green technologies and a strong record of industry-wide compliance help support the development of compliance externalities associated with a responsive regulator.