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Firm dynamics and competition in the electricity market
Örebro University, Örebro University School of Business.ORCID iD: 0000-0003-3724-2399
2018 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of four independent essays that deal with the firm dynamics and competition in the electricity market. Specifically, it addresses two important facets of firm dynamics, namely, firm performance (growth and profitability) and the change in competition intensity that Swedish electricity firms face, brought by the process of deregulation in Swedish electricity market.

Essay 1 investigates whether Gibrat’s law holds for individual firms. The results support the claim that Gibrat’s law is more likely to be rejected ex ante when an entire firm population is considered, but more likely to be confirmed ex post after market selection has “cleaned” the original population of firms or when the analysis treats more disaggregated data.

Essay 2 examines the determinants of firm growth in the Swedish electricity sector. The results indicate that large firms do not grow faster than do other firms in the sector, and that electricity firms’ internal resources are indeed the key determinants of firm growth in the Swedish electricity industry.

Essay 3 shows that although multi-plant firms are more prevalent than single-plants firms in industries characterized by scale economies and imperfect competition, multi-plant electricity firms on average have a one percentage-point lower return on total asset than their single-plant counterparts as they reach a ‘steady state’ firm size when an optimal size is identified. The potential reasons could be loss of control across hierarchical levels within multi-plant firms or the adaption to technological changes lag behind in comparison to single–plant firms.

Essay 4 compare competition intensity before and after the launch of Internet electricity price comparison sites (IEPCS). The heterogeneous effects on competition intensity are found, with the largest effect on competition found in parts of the market that were already characterized by high levels of competition before the launch of IEPCS.

Place, publisher, year, edition, pages
Örebro: Örebro University , 2018. , p. 24
Series
Örebro Studies in Economics, ISSN 1651-8896 ; 39
Keywords [en]
Firm growth, profitability, steady-state, market power, competition, Boone indicator
National Category
Economics
Identifiers
URN: urn:nbn:se:oru:diva-66033ISBN: 978-91-7529-244-1 (print)OAI: oai:DiVA.org:oru-66033DiVA, id: diva2:1192679
Public defence
2018-05-25, Örebro universitet, Hörsalen, Musikhögskolan, Fakultetsgatan 1, Örebro, 13:00 (English)
Opponent
Supervisors
Available from: 2018-03-23 Created: 2018-03-23 Last updated: 2018-04-27Bibliographically approved
List of papers
1. Does Gibrat’s Law hold for Swedish energy firms?
Open this publication in new window or tab >>Does Gibrat’s Law hold for Swedish energy firms?
2015 (English)In: Empirical Economics, ISSN 0377-7332, E-ISSN 1435-8921, Vol. 49, no 2, p. 659-674Article in journal (Refereed) Published
Abstract [en]

Gibrat's law predicts that firm growth is purely random and should be independent of firm size. We use a random effects-random coefficient model to test whether Gibrat's law holds on average in the studied sample as well as at the individual firm level in the Swedish energy market. No study has yet investigated whether Gibrat's law holds for individual firms, previous studies having instead estimated whether the law holds on average in the samples studied. The present results support the claim that Gibrat's law is more likely to be rejected ex ante when an entire firm population is considered, but more likely to be confirmed ex post after market selection has "cleaned" the original population of firms or when the analysis treats more disaggregated data. From a theoretical perspective, the results are consistent with models based on passive and active learning, indicating a steady state in the firm expansion process and that Gibrat's law is violated in the short term but holds in the long term once firms have reached a steady state. These results indicate that approximately 70 % of firms in the Swedish energy sector are in steady state, with only random fluctuations in size around that level over the 15 studied years.

Place, publisher, year, edition, pages
Springer Berlin/Heidelberg, 2015
Keywords
Firm size; Firm growth; Random coefficient; Energy sector
National Category
Economics
Research subject
Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:oru:diva-62323 (URN)10.1007/s00181-014-0883-x (DOI)000358935300012 ()2-s2.0-84938553585 (Scopus ID)
Available from: 2017-11-13 Created: 2017-11-13 Last updated: 2018-04-25Bibliographically approved
2. Firm growth in the Swedish energy sector: Will large firms become even more dominant?
Open this publication in new window or tab >>Firm growth in the Swedish energy sector: Will large firms become even more dominant?
2014 (English)In: International Journal of Energy and Statistics, ISSN 2335-6804, Vol. 2, no 4, p. 247-267Article in journal (Refereed) Published
Abstract [en]

This paper examines the determinants of firm growth in the Swedish energy sector using a sample of 200 energy firms active from 2000 to 2010. The article has two aims. First, we seek to investigate whether there is reason to believe that the Swedish energy market will become more concentrated in the future, dominated by a few firms. That would be the result if, for example, large firms systematically and over time grew faster than the smaller firms in the Swedish market. Second, we investigate whether firm growth can mainly be explained by firm-specific variables, supporting Penrose's [1] suggestion that internal resources are the key determinants of firm growth rates. To this end, quantile regression is used in addition to ordinary least squares regression, to provide a more complete estimation of the growth distribution of firms conditional on different attributes. The results indicate that large firms do not grow faster than other firms in the sector, and that energy firms' internal resources are indeed the key determinants of firm growth in the Swedish energy industry.

Place, publisher, year, edition, pages
World Scientific, 2014
Keywords
Market power, energy market regulation, energy market competetion, quantile regresssion, competetion policy
National Category
Economics
Identifiers
urn:nbn:se:oru:diva-62322 (URN)10.1142/S2335680414500173 (DOI)
Available from: 2015-12-18 Created: 2017-11-13 Last updated: 2018-04-25Bibliographically approved
3. Are multi-plant firms more or less profitable?: Evidence from Swedish electricity firms
Open this publication in new window or tab >>Are multi-plant firms more or less profitable?: Evidence from Swedish electricity firms
(English)Manuscript (preprint) (Other academic)
National Category
Economics
Identifiers
urn:nbn:se:oru:diva-66773 (URN)
Available from: 2018-04-25 Created: 2018-04-25 Last updated: 2018-04-25Bibliographically approved
4. Do Internet price comparison sites make markets more competitive?: An analysis using Swedish electricity firms
Open this publication in new window or tab >>Do Internet price comparison sites make markets more competitive?: An analysis using Swedish electricity firms
(English)Manuscript (preprint) (Other academic)
National Category
Economics
Identifiers
urn:nbn:se:oru:diva-66774 (URN)
Available from: 2018-04-25 Created: 2018-04-25 Last updated: 2018-04-25Bibliographically approved

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