Regulatory Environment and Firm Performance in EU Telecommunications Services

Abstract

The IEB research program in Infrastructure and Transport promotes high quality research in those fields in order to assess the economic consequences of investment and policy decisions. The ultimate aim of the program is to generate socially useful knowledge in this important field that is useful to respond to major challenges. Research is methodologically based on the techniques of applied economic analysis, with topics chosen according to their relevance in guiding public policy. Infrastructures and transport policies are closely related with economic growth, public finance, environmental issues and distribution effects at a territorial level. Disseminating research outputs to a broadaudience is an important objective of the program, whose results must be relevant both at national and international level.The Barcelona Institute of Economics (IEB) is a research centre at the University of Barcelona (UB) which specializes in the field of applied economics. The IEB is a foundation funded by the following institutions: Applus, Abertis, Ajuntament de Barcelona, Diputació de Barcelona, Gas Natural and La Caixa. The IEB working papers represent ongoing research that is circulated to encourage discussion and has not undergone a peer review process. Any opinions expressed here are those of the author(s) and not those of IEB. Documents de Treball de l'IEB 2014/15 REGULATORY ENVIRONMENT AND FIRM PERFORMANCE IN EU TELECOMMUNICATIONS SERVICESDaniel Montolio, Francesc Trillas, Elisa Trujillo-Baute ABSTRACT: We empirically estimate the effects of regulated access prices and firms' multinational status on firm performance by using firm, corporate group, and country level information for the European broadband market between 2002 and 2010. Three measures of firm performance are used, namely: market share, turnover and productivity. Special attention is paid to differences in the impact on the performance measures depending on a firm's position as either a market incumbent or entrant. We find that while access prices have a negative effect on entrants' market share and turnover, the effect on incumbents' market share, turnover and productivity is positive. Further, we find that multinational entrants perform better than national entrants in terms of their market share but worse in terms of their turnover and productivity. The opposite is true of incumbent multinationals which perform better than nationals in terms of their turnover and productivity but worse in terms of their market share. This confirms that a firm's multinational status has a significant impact on its performance, and that this impact differs for incumbents and entrants. Finally, when evaluating the impact of access prices on firm performance at the mean performance of national and multinational firms, we find that the impact of access prices is lower for multinational than for national firms.JEL Codes: L51, L25, L96, F23