R&D investment of electricity-generating firms following industry restructuring

• Published in: Energy policy Vol. 48; pp. 103 - 117
• Main Authors: Kim, Jihwan, Kim, Yeonbae, Flacher, David
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.09.2012; Elsevier; Elsevier Science Ltd
• Subjects: Applied sciences; Deregulation; Developing countries; Economic data; Economics; Electric energy; Electric power; electricity; Electricity generation; Electricity restructuring; Energy; Energy economics; Energy market; Energy policy; Entry liberalization; Exact sciences and technology; General aspects; General, economic and professional studies; government deregulation; Industrialized nations; Industry; Investment; Investments; Liberalization; Market structure; Markets; monopoly; Privatization; R&D investment; Research & development expenditures; Research and development; retail marketing; Small and medium sized enterprises; Studies; Technological change; wholesale marketing; Entry liberalization; R&D investment; Electricity restructuring; Deregulation; OECD countries; Time series; Econometric model; Restructuration; Electric utility; Privatisation; Research and development; Size effect; Panel method; Electric power industry; Investment; Firm strategy
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2012.04.050

Since electricity market restructuring, questions over adequate levels of R&D investments persisted. Using an unbalanced panel data of 70 electricity-generating firms across 15 Organisations of Economic Co-operation and Development countries from 1990 to 2008, this paper empirically examines the impacts of entry liberalization (allowing third party access, establishing a wholesale market, and deregulating a retail market), vertical unbundling, privatization, and firm size on R&D investments. Entry liberalization is associated with a decline in R&D investment. Establishing a wholesale market exhibits the greatest negative effects on R&D investment. Regulated TPA and retail market deregulation also decrease R&D. The effect of privatization is not independently salient but interacts with a wholesale pool to lower R&D investments. Large firms spend more on R&D investment than small firms. Results indicate that the restructuring of the electricity industry reduces R&D investment, which may be detrimental to the reliability and the efficiency of the electricity system as well as to the creation and maintenance of the innovation capabilities necessary to address demand and environmental concerns. ► Entry liberalization decreases R&D outlays of electricity generating utilities. ► Establishment of a wholesale market leads to a substantial decline in R&D spending. ► Private ownership interacts with entry liberalization to lower R&D investment.