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Regulatory Uncertainty: A Reason to Postpone Investments? Not Necessarily

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  • Volker H. Hoffmann
  • Thomas Trautmann
  • Jens Hamprecht

Abstract

There is a polarity in the literature as to whether companies do or do not postpone investment decisions in the light of regulatory uncertainty. In the case of flexible regulation characterized by a high degree and discontinuous resolution of uncertainty, we show that companies do not necessarily postpone investment decisions. We trace this observation back to three motivations: securing competitive resources, leveraging complementary resources, and alleviating institutional pressure. We connect these motivations to fundamental principles of the resource‐based view and institutional theory and further show the existence of a regime where institutionally motivated and resource‐based actions are not necessarily decoupled. We base our research on a case study covering 80 per cent of the German power generation industry which faces regulatory uncertainty from the European CO2 Emission Trading Scheme.

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  • Volker H. Hoffmann & Thomas Trautmann & Jens Hamprecht, 2009. "Regulatory Uncertainty: A Reason to Postpone Investments? Not Necessarily," Journal of Management Studies, Wiley Blackwell, vol. 46(7), pages 1227-1253, November.
    • Handle: RePEc:bla:jomstd:v:46:y:2009:i:7:p:1227-1253
    DOI: 10.1111/j.1467-6486.2009.00866.x
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