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

Daniel Montolio and Elisa Trujillo-Baute

No 2012/1, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: 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.

Keywords: Telecommunications; regulation; investment; internationalization; knowledge (search for similar items in EconPapers)
JEL-codes: D83 F21 F23 L51 L96 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012
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