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What drives investment in telecommunications? The role of regulation, firms’ internationalization and market knowledge

  • Daniel Montolio

    ()

    (Universitat de Barcelona & IEB)

  • Elisa Trujillo

    ()

    (Universitat de Barcelona & IEB)

The aim of this paper is to classify the firms operating in the European telecommunications market according to their degree of internationalization and market knowledge, and to test the effects of this classification and the existence of access regulation on infrastructure investment in European broadband markets. To do so, we construct a (unique) data set for the 27 European countries for the period 2002 to 2009. We estimate, by means of panel data techniques (and instrumental variables to control for any potential endogeneity problem), an investment equation for all firms and separate equations for entrant and incumbent firms. Our results show no significant relation between regulation and total investment. The variables capturing the degree of internationalization and market knowledge have a positive and significant effect on total investment, being a positive and significant effect on entrants’ investment, but no significant impact on that of incumbent firms. This result indicates that, under the current regulatory framework, the firms that invest most are entrants with international experience, while the expansion of incumbents into other countries does not affect their investments in their home countries.

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File URL: http://www.ieb.ub.edu/aplicacio/fitxers/2012/3/Doc2012-1.pdf
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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2012/1.

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Length: 29 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:ieb:wpaper:2012/3/doc2012-1
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  15. Gans, Joshua S & Williams, Philip L, 1999. "Access Regulation and the Timing of Infrastructure Investment," The Economic Record, The Economic Society of Australia, vol. 75(229), pages 127-37, June.
  16. MB Sarkar & S Tamer Cavusgil & Preet S Aulakh, 1999. "International Expansion of Telecommunication Carriers: The Influence of Market Structure, Network Characteristics, and Entry Imperfections," Journal of International Business Studies, Palgrave Macmillan, vol. 30(2), pages 361-381, June.
  17. Peter J Buckley & M Casson, 2003. "The Future of the Multinational Enterprise in retrospect and in prospect," Journal of International Business Studies, Palgrave Macmillan, vol. 34(2), pages 219-222, March.
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