Guy L. F. Holburn

Policy and process: A game-theoretic framework for the design of non-market strategy

We draw on the Positive Political Theory literature to develop insights into how firms decide whether to lobby legislatures or agencies in order to gain favorable policy outcomes. We present a simple structural model of the interaction among a firm, a legislature, an executive, a court and an agency to illustrate how, even if the agency has responsibility for implementing public policy, the firm will, under the right conditions, lobby the legislature instead to bring about a change in policy. Accordingly, we contribute to the existing non-market strategy literature by incorporating institutional players other than the legislature into the analysis, and by addressing the question of how firms allocate lobbying resources across the different branches of government.

Policy Risk and Private Investment in Ontario's Wind Power Sector

Même si des gouvernements adoptent des politiques visant à favoriser la production d’énergie renouvelable, leur capacité d’attirer des investissements privés dans ce domaine dépend aussi d’un autre facteur : il faut que les autorités chargées de gérer cette réglementation puissent s’engager à long terme et de façon crédible face aux investisseurs potentiels. Dans cet article, nous soutenons que, en Ontario, malgré le vaste marché potentiel et de solides politiques incitatives, la gestion inappropriée de la réglementation est un facteur qui a influencé la capacité de la province à attirer d’importants investissements privés en vue de produire de l’énergie éolienne à un coût raisonnable. Nous avons mené une enquête auprès de 63 entreprises de ce secteur pour obtenir leur évaluation de l’environnement ontarien en matière d’investissement dans le secteur de l’énergie renouvelable, et les données empiriques ainsi recueillies confirment notre hypothèse. Les participants ont évalué la stabilité de la réglementation comme étant l’un des aspects les plus faibles de l’environnement d’affaires ontarien – alors que cette stabilité est l’un des facteurs qui ont le plus d’influence sur le choix de l’endroit où les entreprises s’installent. Des interviews ont aussi révélé que les entreprises ont donc évalué le coût de ce risque grâce à des modèles financiers – un calcul qui impliquait des prix de l’énergie plus élevés pour les contribuables – et ont décidé d’investir ailleurs qu’en Ontario. Nous soutenons donc que la province devrait accroître la stabilité de sa réglementation, en renforçant l’indépendance des organismes de réglementation du secteur de l’énergie et en leur donnant plus de pouvoirs de décision.

Bridging Qualitative and Quantitative Methods in Organizational Research: Applications of Synthetic Control Methodology in the U.S. Automobile Industry

We assess the utility of synthetic control, a recently developed empirical methodology, for applications in organizational research. Synthetic control acts as a bridge between qualitative and quantitative research methods by enabling researchers to estimate treatment effects in contexts with small samples or few occurrences of a phenomenon or treatment event. The method constructs a counterfactual of a focal firm, or other observational unit, based on an objectively weighted combination of a small number of comparable but untreated firms. By comparing the firm’s actual performance to its counterfactual replica without treatment, synthetic control estimates, under certain assumptions, the magnitude and direction of treatment effects. We illustrate and critique the method in the context of the U.S. auto industry by estimating (a) the effect of government intervention in Chrysler’s management from 2009 to 2011 on its sales volumes and (b) the impact of Toyota’s 2010 “acceleration crisis” on Camry sales.

Making Causal Inferences in Small Samples Using Synthetic Control Methodology: Did Chrysler Benefit from Government Assistance?

We introduce synthetic control analysis to management research. This recently developed statistical methodology overcomes challenges to causal inference in contexts constrained by small samples or few occurrences of the phenomenon of interest. Synthetic control constructs a replica of a focal firm, or other observation unit, based on a weighted combination of untreated firms with similar attributes within the sample population. The method quantifies the magnitude and direction of a treatment effect by comparing the actual performance of a focal unit to its counterfactual replica without treatment. As an illustration, we assess the impact of government intervention in the auto sector on the performance of Chrysler which, following the financial crisis, accepted government support in return for Treasury oversight. The synthetic Chrysler we construct — representing the firm’s estimated performance without government intervention — sold 29% more vehicles in the U.S. than did the actual firm during the intervention period.

Information Asymmetries and Regulatory Rate-Making: Case Study Evidence from Commonwealth Edison and Duke Energy Rate Reviews

Building on Oliver Williamson’s original analysis, the contributors introduce new ideas, different perspectives and provide tools for better understanding changes in the approach to regulation, the reform of public utilities, and the complex problems of governance. They draw largely upon a transaction cost approach, highlighting the challenges faced by major economic sectors and identifying critical flaws in prevailing views on regulation. Deeply rooted in sector analysis, the book conveys a central message of new institutional economics: that theory should be continuously confronted by facts, and reformed or revolutionized accordingly.