Economies Of Vertical Integration Research Articles

Vertical disintegration in the European electricity sector: Empirical evidence on lost synergies

The EU has been promoting unbundling of the transmission grid from other stages of the electricity supply chain with the aim of fostering competition in the upstream stage of electricity generation. At present, ownership unbundling is the predominant form of unbundling in Europe. From a policy perspective, a successful unbundling regime would require that the benefits of increased competition in power generation would at least offset the associated efficiency losses from vertical divestiture. Since evidence on this topic is scarce, this study helps fill this void by empirically estimating the magnitude of economies of vertical integration (EVI) between electricity generation and transmission based on a quadratic cost function. For this purpose we employ unique firm-level panel data of European electricity utilities. Our results confirm the presence of substantial EVI of 14% for the median sized integrated utility. Moreover, EVI tend to increase with firm size.

Estimating size and scope economies in the Portuguese water sector using the Bayesian stochastic frontier analysis

This study aims to search for economies of size and scope in the Portuguese water sector applying Bayesian and classical statistics to make inference in stochastic frontier analysis (SFA). This study proves the usefulness and advantages of the application of Bayesian statistics for making inference in SFA over traditional SFA which just uses classical statistics. The resulting Bayesian methods allow overcoming some problems that arise in the application of the traditional SFA, such as the bias in small samples and skewness of residuals. In the present case study of the water sector in Portugal, these Bayesian methods provide more plausible and acceptable results. Based on the results obtained we found that there are important economies of output density, economies of size, economies of vertical integration and economies of scope in the Portuguese water sector, pointing out to the huge advantages in undertaking mergers by joining the retail and wholesale components and by joining the drinking water and wastewater services.

The effect of output specification on the optimal policy design for electric utilities

We show that the manner in which the production process is seen when analyzing data on electricity production has an impact on the policy conclusions. In particular, we show that the different specifications of output found in the literature can generate quite diverse views regarding regulation and optimal industry structure, even when using the same data to estimate a cost function. To illustrate this we use information gathered from the Spanish Electric Industry and analyze electricity activities following three approaches: the traditional aggregate activity view, the multistage model and the multioutput-multistage approach. We estimate the degree of economies of scale S and derive marginal costs for all models, plus economies of vertical integration (EVI) for the last two ones. Then we compare these results and verify that the aggregate analysis can mislead policymaking.

Economies of vertical integration in the Swiss electricity sector

Over the last two decades, several European nations have introduced reforms to their electricity sector. Generally, these reforms require a legal and functional unbundling of vertically integrated companies. These unbundling processes may reduce the possibilities that exist to fruitfully exploit the advantages of vertical integration. The goal of this paper is to empirically analyze the presence of economies of scale and vertical integration in the Swiss electricity sector. Economies of vertical integration between electricity production and distribution result from reduced transaction costs, better coordination of highly specific and interdependent investments and less financial risk. Different econometric specifications for panel data, including a random effects and a random-coefficients model, have been used to estimate a quadratic multi-stage cost function for a sample of electricity companies. The empirical results reflect the presence of considerable economies of vertical integration and economies of scale for most of the companies considered in the analysis. Moreover, the results suggest a variation in economies of vertical integration across companies due to unobserved heterogeneity.

経営史学の時代

This paper aims at making clear the importance and possibility of applied business history for understanding current economic and business issues. In order to solve the existing problems, it is necessary for an industry or a company to appreciate its own historical contexts. Even if a theory to explain the troubles is correct, it cannot be valid without the balanced appreciation of historical perspectives.The paper asserts the validity of applied business history. The tasks of applied business history are to comprehend the historical circumstances of the specific industry or company, and, based on that appreciation, to support the industry or company to conquer the present difficulties.In the paper, three telling cases are examined : The liberalization of the Japanese electric power industry; the reconstruction of the Japanese petroleum industry; and the community-based economic renaissance in Japan.One of the most important characteristics in the 124 year history of the Japanese electric power industry is private ownership and private management with the exception of the state management from 1939 to 1951. In the industry, the economies of scale have decreased, while the economies of vertical integration are still effective. Based on these historical contexts, it can be safely claimed that the goal of the liberalization of the Japanese electric power industry should be to abolish regional monopoly and to maintain vertically-integrated private companies.The Japanese petroleum industry possesses two weaknesses. The first is the disintegration of the upstream (exploration and production) part from the downstream (refinery and retail) segment. The other is that upstream companies are too numerous and two small. Moreover, under the regulation of the petroleum industry law from 1962 to 2002, the organizational capabilities of the downstream oil companies have undermined. Therefore, the downstream companies possess limited financial power for integrating into upstream businesses, though their corporate sizes are relatively large. Given these historical characteristics of the Japanese petroleum industry, the first step of the reconstruction of the industry should be to make the horizontal integration within the upstream segment.In the process of Japanese modernization, regional industrial accumulations have played important roles. The accumulations are the characteristics of specific areas, where many small and medium-sized enterprises gather in narrow spaces. Based on historical experiences, it is essential for the revitalization of local economies to realize the renaissance of industrial accumulations.