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A capability perspective on performance deficiencies in utility firms

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  • Worch, Hagen
  • Truffer, Bernhard
  • Kabinga, Mundia
  • Eberhard, Anton
  • Markard, Jochen
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    Abstract

    This paper proposes a capability-based framework to explain performance deficiencies in utility firms as a result of policy and regulatory changes. The framework complements conventional explanations such as transaction cost and agency approaches, which suggest that appropriate incentives and regulations increase the performance of public utilities after relatively short adaptation processes. In contrast, we argue that capability gaps – understood as an inadequate availability of competences, skills and experiences – tend to have long-lasting effects on firm performance. A crucial implication of the capability perspective is that regulatory interventions that create capability gaps at the firm level may affect utility performance – and the ability of infrastructure sectors to provide adequate services – more severely than expected by traditional approaches.

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    Bibliographic Info

    Article provided by Elsevier in its journal Utilities Policy.

    Volume (Year): 25 (2013)
    Issue (Month): C ()
    Pages: 1-9

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    Handle: RePEc:eee:juipol:v:25:y:2013:i:c:p:1-9

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    Web page: http://www.elsevier.com/locate/inca/30478

    Related research

    Keywords: Capabilities; Utilities; Performance; Regulation;

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    1. Stenzel, Till & Frenzel, Alexander, 2008. "Regulating technological change--The strategic reactions of utility companies towards subsidy policies in the German, Spanish and UK electricity markets," Energy Policy, Elsevier, vol. 36(7), pages 2645-2657, July.
    2. David P. Baron & Roger B. Myerson, 1979. "Regulating a Monopolist with Unknown Costs," Discussion Papers 412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Markard, Jochen & Truffer, Bernhard, 2006. "Innovation processes in large technical systems: Market liberalization as a driver for radical change?," Research Policy, Elsevier, vol. 35(5), pages 609-625, June.
    4. Gratwick, Katharine Nawaal & Eberhard, Anton, 2008. "Demise of the standard model for power sector reform and the emergence of hybrid power markets," Energy Policy, Elsevier, vol. 36(10), pages 3948-3960, October.
    5. M. Finger & J. Groenewegen & R. Künneke, 2005. "The Quest for Coherence Between Institutions and Technologies in Infrastructures," Competition and Regulation in Network Industries, Intersentia, vol. 6(4), pages 227-260, December.
    6. Dyner, Isaac & Larsen, Erik R., 2001. "From planning to strategy in the electricity industry," Energy Policy, Elsevier, vol. 29(13), pages 1145-1154, November.
    7. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
    8. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
    9. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Gebauer, Heiko & Worch, Hagen & Truffer, Bernhard, 2012. "Absorptive capacity, learning processes and combinative capabilities as determinants of strategic innovation," European Management Journal, Elsevier, vol. 30(1), pages 57-73.
    11. Mark Armstrong & David Sappington, 2005. "Regulation, Competition and Liberalization," Industrial Organization 0505011, EconWPA, revised 07 Oct 2005.
    12. J-M- Glachant, 2002. "Why regulate deregulated network industries?," Competition and Regulation in Network Industries, Intersentia, vol. 3(3), pages 297-312, September.
    13. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    14. repec:hal:journl:halshs-00624266 is not listed on IDEAS
    15. Steven L. Puller, 2007. "Pricing and Firm Conduct in California's Deregulated Electricity Market," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 75-87, February.
    16. Paul L. Joskow, 2008. "Lessons Learned from Electricity Market Liberalization," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 9-42.
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