Regulatory Uncertainty: A Reason to Postpone Investments? Not Necessarily

Authors: Hoffmann, Volker H.; Trautmann, Thomas; Hamprecht, Jens

Source: Journal of Management Studies, Volume 46, Number 7, November 2009 , pp. 1227-1253(27)

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Abstract:

There is a polarity in the literature as to whether companies do or do not postpone investment decisions in the light of regulatory uncertainty. In the case of flexible regulation characterized by a high degree and discontinuous resolution of uncertainty, we show that companies do not necessarily postpone investment decisions. We trace this observation back to three motivations: securing competitive resources, leveraging complementary resources, and alleviating institutional pressure. We connect these motivations to fundamental principles of the resource-based view and institutional theory and further show the existence of a regime where institutionally motivated and resource-based actions are not necessarily decoupled. We base our research on a case study covering 80 per cent of the German power generation industry which faces regulatory uncertainty from the European CO₂ Emission Trading Scheme.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-6486.2009.00866.x

Affiliations: 1: ETH Zurich

Publication date: 2009-11-01