Deregulation Process, Governance Structures and Efficiency: The U.S. Electric Utility Sector

Magali Delmas and Yesim Tokat
Additional contact information
Yesim Tokat: U of Californai, Santa Barbara

Research Papers from Stanford University, Graduate School of Business

Abstract: This paper is an empirical assessment of the comparative efficiency of governance structures in an environment marked by high uncertainty. We analyze the short-term impact of retail deregulation on the productive efficiency of electric utilities in the United States. We argue that there are transitory costs linked to the process of deregulation. The business strategy literature suggests different governance structures to cope with uncertainty linked to changing regulatory environments. Transaction cost economics suggests that firms may reduce their exposure to the uncertainty created by the process of deregulation by adopting vertical integration strategies. Organizational scholars on the contrary argue that firms vertically disintegrate and adopt flexible governance structures to increase their adaptability to the new conditions. Our empirical analysis is based on 177 investor-owned electric utilities representing 83% of the total U.S. electricity production by utilities from 1998-2001. Our results show that the process of deregulation has a negative impact on firms' productive efficiency measured using Data Envelopment Analysis. However, firms that are vertically integrated into electricity generation or that rely on the market for the supply of their electricity are more efficient than firms that adopt hybrid structures combining vertical integration and contracting.

Date: 2003-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://gsbapps.stanford.edu/researchpapers/library/RP1790.pdf
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to gsbapps.stanford.edu:443 (certificate verify failed) (http://gsbapps.stanford.edu/researchpapers/library/RP1790.pdf [302 Found]--> https://gsbapps.stanford.edu/researchpapers/library/RP1790.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:1790

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().