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The impact of regulation on private security industry dynamics

Author

Listed:
  • Glenn Scheerlinck

    (Vrije Universiteit Brussel)

  • Caroline Buts

    (Vrije Universiteit Brussel)

  • Marc Cools

    (Ghent University
    Vrije Universiteit Brussel)

  • Genserik Reniers

    (Delft University of Technology)

Abstract

As the amount of regulation continues to increase and private security firms play a more and more vital role in a modern society’s security, policy makers and practitioners acknowledge the need for sound research. Moreover, studying regulation and private security industry dynamics can enable a better alignment of regulation to its objectives, namely to control abusive and corrupt conduct of some private security companies and to improve the professionalism of the industry. Using novel data on the width and the restrictiveness of private security regulation and data on firm birth rate, firm death rate and firm survival rate, an instrumental variable approach is employed in a panel data random effect models, covering the period from 2013 to 2017. As regulation increases, we document a decrease in firm birth rate, firm death rate as well as firm survival rate of recent newcomers. Regarding firm birth rate and death rate, we document a gradually decreasing impact of older regulation. However, while additional regulation negatively affects survival rate, we find no impact of older regulation on company survival. Incumbents clearly gain an advantage from lobbying to increase regulation and consequently raising barriers to entry.

Suggested Citation

  • Glenn Scheerlinck & Caroline Buts & Marc Cools & Genserik Reniers, 2020. "The impact of regulation on private security industry dynamics," European Journal of Law and Economics, Springer, vol. 50(2), pages 223-240, October.
    • Handle: RePEc:kap:ejlwec:v:50:y:2020:i:2:d:10.1007_s10657-020-09663-5
    DOI: 10.1007/s10657-020-09663-5
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    More about this item

    Keywords

    Private security; Regulation; Industry dynamics; European Union;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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