A new argument using embeddedness and sensemaking to explain small firms' responses to employment regulation

• Author: Susan Mayson,Rowena Barrett
• DOI: http://doi.org/10.1111/1748-8583.12141
• Published date: 01 January 2017
• Date: 01 January 2017

A new argument using embeddedness and

sensemaking to explain small firms’responses to

employment regulation

Susan Mayson, Department of Management, Monash University

Rowena Barrett ,School of Management, Queensland University of Technology

Human Resource Management Journal, Vol 27, no 1, 2017, pages 189–202

In this essay,we develop a new argumentabout how the conceptof embeddedness and a sensemaking approach

can be used to theorise small firms’regulatory responses, especially to employment regulation. We want to

move beyond the simplistic and narrow conceptualisations of resistant action in small firms in response to

regulation. We contribute to theorising on small firms’regulatory responses by developing an embedded

accountof social action that takesus beyond the dichotomyof individualised (micro)and institutional accounts

(macro) explanations of firm behaviour. Our argument emphasises the situatedness of small firm behaviour

shaped by, and in turn shaping, the contexts in which they are embedded. We go beyond stereotypes to give

a nuanced account of situated action. In conclusion, we briefly outline how our ideas can be operationalised

to explain small firms’diverse responsesto regulation.

Contact: Dr Susan Mayson, Department of Management, Faculty of Business and

Economics, Monash University, PO Box 197, Caulfield East, Victoria 3145, Australia.

Email: susan.mayson@monash.edu

Keywords: regulation; sensemaking; embeddedness; small firms

INTRODUCTION

Small firm owner-managers are vocal in their distaste for ‘red tape’andthe ‘regulation

as a burden’narrative is discernable across the media in relation to discussions about

effects of regulation(Peck et al., 2012; Barrett et al., 2014). The purposeof regulation is

to protect and improve social and economic outcomes for individuals, business, society and

the economy (World Bank, 2015). While in 2014–2015, the World Bank reports some 189

economies implemented 231 regulatoryreforms making it easier for smallfirms to do business

(World Bank, 2015), this does not stop the ‘red tape’complaint. As Chittenden and Ambler

(2015) argue, while ‘red tape’strictly only refers to the administrative burden on small firms,

in reality, it has become a catch-allphrase covering an array of administrative,procedural and

other costs associated with compliance, which is used by some to create a political narrative

for change.

The regulationcomplaint narrative isproblematic in the framing of smallfirms’responses: it

narrowly defines the way regulation is seen and therefore how small firms are perceived to

respond (Carter et al., 2009; Barrett et al., 2014). The narrative reminds small firm owner-

managers that agents outside their firms can allow and disallow certain firm-level actions

regardless of the owner-manager’s own plans and preferences. For regulators, the narrative

suggests smallfirms will not comply withregulation. This narrativeis limited but frames many

studies of the effect of regulation on small firms whether these are perception based,

compliance cost studies, cross-national surveys or qualitative studies (Kitching et al., 2015).

HUMAN RESOURCEMANAGEMENT JOURNAL, VOL27, NO 1, 2017 189

©2017 John Wiley& Sons Ltd

Pleasecite this article in pressas: Mayson, S. and Barrett,R. (2017) ‘A new argumentusing embeddedness andsensemaking to explainsmall firms’

responsesto employmentregulation’.HumanResource ManagementJournal 27: 1, 189–202

doi: 10.1111/1748-8583.12141

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