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Innovation and market regulation: evidence from the European electricity industry

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  • Carlo Cambini
  • Federico Caviggioli
  • Giuseppe Scellato

Abstract

This paper studies the effects of changes in the level of product market regulation on the industry-level innovation intensity in the EU electricity sector during years 1990–2009. In order to test the impact of deregulatory policies on the propensity to innovate in energy technologies, we match data on R&D budgets and European Patent Office patent applications from International Energy Agency and Eurostat Databases with the Organisation for Economic Co-operation and Development indexes of product market regulation. The analysis addresses innovations in the traditional electricity-related technologies, but keeping aside renewable energy technologies. Findings show an increase in patenting activities following market deregulation, measured along three factors: entry barriers, public ownership and vertical integration. In particular, econometric results suggest that policies aimed at reducing vertical integration – i.e. to unbundle networks from energy generation and supply – have a positive impact on innovation activity. Results are robust to the introduction of controls for country-level public R&D expenditures in the electricity field.

Suggested Citation

  • Carlo Cambini & Federico Caviggioli & Giuseppe Scellato, 2016. "Innovation and market regulation: evidence from the European electricity industry," Industry and Innovation, Taylor & Francis Journals, vol. 23(8), pages 734-752, November.
    • Handle: RePEc:taf:indinn:v:23:y:2016:i:8:p:734-752
    DOI: 10.1080/13662716.2016.1206464
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    References listed on IDEAS

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    1. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD Publishing.
    2. Andrea Bassanini & Ekkehard Ernst, 2002. "Labour Market Institutions, Product Market Regulation, and Innovation: Cross-Country Evidence," OECD Economics Department Working Papers 316, OECD Publishing.
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    Cited by:

    1. Marino, Marianna & Parrotta, Pierpaolo & Valletta, Giacomo, 2019. "Electricity (de)regulation and innovation," Research Policy, Elsevier, vol. 48(3), pages 748-758.
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    3. Mika Goto & Kohei Fujita & Toshiyuki Sueyoshi, 2020. "Marginal Effect of R&D Investment and Impact of Market Reforms—An Empirical Analysis of Japanese Electric Power Companies," Energies, MDPI, vol. 13(13), pages 1-15, July.
    4. Ribeiro, Beatriz Couto & Ferrero, Luciane Graziele Pereira & Bin, Adriana & Blind, Knut, 2023. "Effects of innovation stimuli regulation in the electricity sector: A quantitative study on European countries," Energy Economics, Elsevier, vol. 118(C).
    5. Blind, Knut & Münch, Florian, 2024. "The interplay between innovation, standards and regulation in a globalising economy," LSE Research Online Documents on Economics 122260, London School of Economics and Political Science, LSE Library.
    6. Razzaq, Asif & Sharif, Arshian & Yang, Xiaodong & Dogan, Eyup, 2024. "Influence mechanism of electricity price distortion on industrial green transformation: A spatial analysis of Chinese regions," Energy Economics, Elsevier, vol. 130(C).
    7. Steffen, Bjarne & Karplus, Valerie & Schmidt, Tobias S., 2022. "State ownership and technology adoption: The case of electric utilities and renewable energy," Research Policy, Elsevier, vol. 51(6).
    8. Zhang, Jianhong & Jiang, Jiangang, 2024. "Investment deregulation and innovation performance of Chinese private firms," Journal of Financial Stability, Elsevier, vol. 70(C).
    9. Fuentes, Rolando & Chen, Dongmei & Felder, Frank A., 2023. "Systematically mapping innovations in electricity using startups: A comprehensive database analysis," Technology in Society, Elsevier, vol. 74(C).
    10. Silvia Blasi & Silvia Rita Sedita, 2020. "The diffusion of a policy innovation in the energy sector: evidence from the collective switching case in Europe," Industry and Innovation, Taylor & Francis Journals, vol. 27(6), pages 680-704, June.
    11. Evan, Tomáš & Holý, Vladimír, 2021. "Economic conditions for innovation: Private vs. public sector," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).
    12. Strong, Derek Ryan, 2017. "The Early Diffusion of Smart Meters in the US Electric Power Industry," Thesis Commons 7zprk, Center for Open Science.
    13. Agyeman, Stephen Duah & Lin, Boqiang, 2023. "Electricity industry (de)regulation and innovation in negative-emission technologies: How do market liberalization influences climate change mitigation?," Energy, Elsevier, vol. 270(C).
    14. Sköld, David & Fornstedt, Helena & Lindahl, Marcus, 2018. "Dilution of innovation utility, reinforcing the reluctance towards the new: An upstream supplier perspective on a fragmented electricity industry," Energy Policy, Elsevier, vol. 116(C), pages 220-231.
    15. Tom'av{s} Evan & Vladim'ir Hol'y, 2020. "Economic Conditions for Innovation: Private vs. Public Sector," Papers 2004.07814, arXiv.org, revised Oct 2020.

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