This paper evaluates the impact of the tightening in price cap by OFWAT and of other operational factors on the efficiency of water and sewerage companies in England and Wales using a mixture of data envelopment analysis and stochastic frontier analysis. Previous empirical results suggest that the regulatory system introduced at privatization was lax. The 1999 price review signaled a tightening in regulation which is shown to have led to a significant reduction in technical inefficiency. The new economic environment set by price-cap regulation acted to bring inputs closer to their cost-minimizing levels from both a technical and allocative perspective. IntroductionThe England and Wales water and sewerage industry was privatized in 1989 and thenceforth has been subject to a sequence of five-year price controls in the form of price caps. Price-cap regulation is set out to be a high-powered incentive scheme. However, previous empirical findings have shown that the cap introduced at privatization in 1989 had been lax (Saal and Parker, 2000), in the sense of allowing real price increases and the evidence that the first price review in 1994 produced efficiency gains is weak Parker, 2001 and. This may be explained by the double duty of the regulator to encourage a higher level of efficiency and provide the companies with the financial resources to support their investment programs. The 1999 price review signaled a change in the implementation of regulatory policy by imposing for the first time a real price reduction.

The advent of the digital age seems to have displaced brick-and-mortar travel agencies. This implies that to be competitive, traditional travel agencies must reconfigure their business processes. Using the resource-based view as a theoretical paradigm predicting performance differentials, this article investigates the impact of dynamic capabilities on operational capabilities, and the way network resources, generally deriving from interfirm connections, moderate this relationship. The empirical research design uses a two-stage Data Envelopment Analysis approach on a sample of traditional travel agencies. The findings, corroborated by a subsequent qualitative analysis, suggest that the dynamic capabilities unfolding from shifting the business processes from the outgoing to the incoming market segment, and from retailing to packaging tourism products, boost the competitiveness of brick-and-mortar travel agencies. However, while network resources positively support the shift from outgoing to incoming processes, they may hinder the shift from retailing to packaging processes.

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