Performance, risk and strategy in privatised, regulated industries

Abstract

Internationally public utilities, sometimes referred to as network industries, are being privatised and dedicated regulatory structures to protect the public interest are being introduced. This study looks at the related issues of post‐privatisation performance, regulatory risk and management strategies in privatised public utilities, drawing on evidence from the UK. The main findings are, first, that in assessing the impact of privatisation on economic performance it is difficult to separate out the effects of ownership, competition, regulation and technological change. Second, that in terms of the distribution of the efficiency gains, initially investors were the main beneficiaries in the UK, but consumers gained as competition developed and regulation tightened. Third, regulated enterprises are subject to regulatory risk as well as commercial risk with implications for types of management strategies adopted. Following privatisation the dynamics of regulation involve both the regulator and management learning about regulation and the optimal strategies to adopt. The UK's experiences are educational for those countries now contemplating or in the process of introducing privatisation programmes.