Role of market based instruments in the new business paradigm

Luciano Azzolini, Anshuman Khare

Research output: Contribution to journalJournal Articlepeer-review


This paper attempts to develop a prescriptive theory/model for the strategic application of market based policy instruments. The research paper documents the development of command and control regulatory instruments and provides a normative account of their use by businesses for competitive positioning. The paper then reports the development of Market Based Policy Instruments (MBI) and explains their prospective defensive and offensive strategic applications based on Porter's Five Forces model of industry analysis. Finally, a prescriptive model that describes the strategic application of MBI is provided based on the preceding analysis. It is assumed that successful firms will not shy away or avoid future regulatory instruments but use them to their competitive advantage. That competitive advantage will come from core firm values that emphasize dramatic increases in resource productivity, the elimination of waste, the use of solution-based business models, and reinvestment in the natural capital. The strategies and tactics that will guide the evolution of "laggard" firms into "achiever" and "enviropreneurial" firms is not precisely mapped out, but there are a number of tools, tactics and strategies that firms can use. All of them are applicable depending on the managerial maturity of the firm and its capacity to extend its environmental management practices, strategy and vision throughout its organisation and to its constellation of relationships. Firms looking for unique competitive advantages should consider using market based regulatory instruments to differentiate their products and services to overcome seemingly impossible market entry barriers, reduce operating costs, and turn waste into profit.

Original languageEnglish
Pages (from-to)311-338
Number of pages28
JournalJournal of Environmental Assessment Policy and Management
Issue number3
Publication statusPublished - Sep. 2004


  • Competitive advantage
  • Economic sustainability
  • Environmental differentiation
  • Enviropreneurial firms
  • Market Based Instruments (MBI)


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