1. Is larger really better? Productivity and firm size in European electricity generation sectors.
- Author
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Steinbrunner, Philipp
- Subjects
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BUSINESS size , *ELECTRIC power production , *GOVERNMENT ownership , *ORGANIZATIONAL performance - Abstract
Although a conventional wisdom claims that larger firms perform better than smaller ones, the conclusions drawn by the literature are ambiguous. This study examines the effect of firm size on productivity, using a dataset on European electricity generators from 2012 to 2020. European electricity generation sectors are particularly interesting given the substantial liberalisations in the past decades and strong subsidisation of electricity generated from renewables. Next to estimating productivity of electricity generators and establishing a link between firm size and performance in this industry, the analysis allows for heterogeneity of impacts of firm size on productivity across various dimensions (e.g., regulation scheme, state ownership), as firm size may attenuate or fuel associated problems and benefits. Besides, it adds to the literature by investigating whether and how renewable subsidies impact reallocation from the technically less efficient to the more productive firms, since they often favour smaller generators in European countries that might be less productive. The overall results highlight that firm size significantly boosts firm performance. Effects, however, diminish with size. Last, renewable subsidies deteriorate allocative efficiency. Hence, renewable subsidies favouring smaller generators are at the cost of allocative efficiency. • The study estimates production functions for electricity generation companies. • It also analyses the firm size-performance relationship in this sector. • It allows for heterogeneity of impacts across various dimensions (e.g., state ownership). • Firm size is measured continuously, allowing to control for unobserved heterogeneity. • I examine the effect of renewable subsidies on reallocation from less to more productive companies. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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