Urban waste management sector: What distinguishes high growth firms from satisficers 

High-growth firms (all definitions in document titled “SMEs in the Tourism Sector In Nepal: Features of High Growth, Satisficing, and ‘Green’ Firms) in waste management were not likely to engage in green practices themselves, which satisficing waste management firms were significantly likely to NOT engage in green practices themselves. 

This is why the link with professionalism and the provision of higher quality products that we see in the green tourism sector is not visible for the urban waste management sector as a whole. 

Learning was not a strong driver of productivity in the waste management sector. High-growth waste management firms reported some levels of learning by doing but satisficers did not engage in any significant learning. In fact, satisficers in the waste management sector were significantly more likely NOT to engage in training. These findings are not surprising as success in this sector is not based on providing highly competitive services but rather in being competitive enough to meet the requirements of consumers or local governments in niche markets. Our key informant interviews in the sector also revealed the importance of informal networks controlling these markets, which survey questions are not well suited to capture. 

High-growth waste management companies were less likely to have industry association affiliations relative to lower growth ones, suggesting that successful firms in the sector depend on other types of networks, very likely informal ones.

High-growth waste management firms are a little more likely to have and benefit from their political networks. Getting business in a sector where opportunities are not high usually requires some political access. However, satisficers were very likely NOT to have connections with local governments, which can help explain why they had little ambition to grow. The waste management sector in most developing countries is still very informal and driven by local political networks. Low capability firms with effective local political networks can be sufficiently successful without needing to improve their capabilities. 

Receiving payments from customers on time was a significant constraint for HGFs in urban waste management. This reflects the informal nature of the business, the difficulty of enforcing payments in weak rule of law contexts when the service and payment are not immediately exchanged. It could also reflect the fact that willingness to pay for waste management services is not yet strong enough in Nepal. If so, the policy framework should also reflect the market failure and find ways of sustaining demand in an activity important for sustaining the urban environment. 

Poor road connectivity was also identified as a significant constraint by HGF firms, as not accessing customers affects their revenues.

The comparison of green tourism with urban waste management shows the significant differences in the types of firms that are emerging depending on the technologies and markets involved. Green tourism relies on better than average services and professionalism, while urban waste management relies more on informal networks that provide access to local business opportunities. However, both reveal similar underlying problems that policy needs to address. In both cases the business models are partially self-sustaining based on market demand, but a better green outcome depends on policy that addresses the relevant market failures. In both cases, the market failure is that not all investments in green practices are justifiable by market returns that the private investor can recover. For a developing country like Nepal, identifying the priority areas of policy support is vitally important. These are areas where the returns to public investments are justified, and where policy design can prevent the capture of these resources by firms that do not then deliver the public good.