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Guy Holburn is Professor of Business, Economics and Public Policy, and Suncor Chair in Energy Policy at the Ivey Business School, University of Western Ontario. His areas of expertise are regulation, governance, and business strategy, with a focus on the energy and utilities sectors. He has published widely in top peer-reviewed academic journals, has authored numerous reports on provincial and federal energy policies, and is a regular contributor to local and national media.
Dr. Holburn is the founder and Director of the Ivey Energy Policy and Management Centre, Canada’s leading university-based centre for applied research on energy sector policy. He is also an advisory board member of the Canadian Network for Energy Policy Research and Analysis, a member of the Council for Clean and Reliable Energy, and an executive committee member of the Alliance for Research on Corporate Sustainability.
Dr. Holburn has served as an expert consultant and advisor to corporations and governments in Canada and the U.S. He has provided advice on corporate governance, economic impact assessments, merger/acquisition strategy, electricity regulation, pipeline regulation, and regional economic development strategy. He was the only Canadian academic invited to testify as an expert witness at the Muskrat Falls Inquiry, where he provided opinions on utility regulation and corporate governance issues. He is also a director of London Hydro, a large Ontario utility.
Holburn joined Ivey in 2001 and teaches both degree and executive development programs. He holds a Ph.D. and M.A. from the University of California, Berkeley, and a B.A. Hons. (First Class) from Cambridge University. Previously Holburn worked for several years as a management consultant for Bain and Company in England and in South Africa.
Abstract: Multinational firms often make multiple investments over time in a concentrated set of countries, accumulating superior knowledge and capabilities in these environments. Researchers have nonetheless uncovered factors that can lead firms to deviate from strategic trajectories defined by their prior investments. In a statistical analysis of country entry decisions by Japanese manufacturing firms over a 35-year period, we found that firms’ tendencies to re-invest in the same host countries were smaller for horizontal (i.e. market-seeking) investments but greater for vertical (i.e. efficiency-seeking) investments. We also found that organizational capabilities influence the geographic trajectory of international expansion: firms with stronger marketing and production capabilities were less likely to be influenced by the locations of prior entries and were more likely to invest in new countries.
Research summary: This study examines strategic and resource contingencies that shape MNEs’ country location choices. Our analysis of overseas production investments by Japanese firms (19712006) finds that differences in investment motives (i.e. horizontal and vertical investment) and corporate capabilities (i.e. marketing and production capabilities) moderate how prior entries into a host country affect subsequent entry decisions. In general, the positive impact of prior entries on investment in a country is weaker for horizontal investments and stronger for vertical investments. A more nuanced relationship emerges when entry decisions are analyzed in conjunction with heterogeneous corporate marketing and production capabilities. The study illustrates the novel insights to be gained from analyzing the joint impact of path dependence, managerial intentions, and corporate capabilities on country location decisions.
Abstract: We examine how firms strategically manage opposition from organized stakeholders who participate in regulatory agency policy-making processes. As stakeholder opposition in regulatory agency hearings increases, we argue that firms invest more in developing counter-balancing support from elected politicians who oversee regulators, and more so when regulators are less experienced or are closer to re-appointment dates. We find robust statistical support for our predictions in a statistical analysis of financial campaign contributions to state politicians by firms in the U.S. electric utility industry during the period 1999 to 2010. Our findings contribute to nonmarket strategy research by providing evidence that firms respond to contested regulatory environments by cultivating support from elected political institutions, contingent on the degree of regulator sensitivity to political and stakeholder pressures.
Abstract: Drawing on internalization theory and economic geography research, we examine how the spatial structure of MNE subsidiaries in supranational regions affects subsidiary location choices. Our analysis of foreign production investments by Japanese manufacturing firms from 1971-2006 supports our theoretical predictions: firms were more likely to establish new production subsidiaries in countries geographically more proximate to existing production subsidiaries, but not to trading subsidiaries, in the same region. The proximity effect diminished for production subsidiaries engaged in accessing natural resources or R&D. Performance of production subsidiaries was also stronger for those closer to other production subsidiaries in the same region.
Abstract: We assess the utility of synthetic control, a recently developed empirical methodology, for applications in organizational research. Synthetic control acts as a bridge between qualitative and quantitative research methods by enabling researchers to estimate treatment effects in contexts with small samples or few occurrences of a phenomenon or treatment event. The method constructs a counterfactual of a focal firm, or other observational unit, based on an objectively-weighted combination of a small number of comparable but untreated firms. By comparing the firm’s actual performance to its counterfactual replica without treatment, synthetic control estimates, under certain assumptions, the magnitude and direction of treatment effects. We illustrate and critique the method in the context of the U.S. auto industry by estimating (a) the effect of government intervention in Chrysler’s management from 2009-2011 on its sales volumes, and (b) the impact of Toyota’s 2010 acceleration crisis’ on Camry sales.
Abstract: We examine the effect of consumer advocate participation in administrative procedures on regulatory policy. We use a unique panel database of rate reviews conducted for U.S. electric utilities from 1980 to 2007 to assess how state consumer advocates affect Public Utility Commission decisions on utilities’ allowed financial returns and rate structures. We find first that utilities experience fewer rate reviews in states with consumer advocates, consistent with utilities strategically postponing requests for rate increases. Second, after controlling for observed and unobserved state characteristics, we find that PUCs in states with consumer advocates permit a return on equity that is on average 0.45 percentage points lower than states without advocates equivalent to a 7.9 million (3.7%) reduction in average utility operating income, all else equal. Third, consumer advocates are associated with lower residential rates relative to other customer classes. Our findings provide statistical support for the thesis that institutionalizing interest group representation in administrative procedures is one way for legislatures indirectly to influence agency-determined policies.
Abstract: MNEs can learn from the foreign investment experiences of other firms when evaluating their own foreign entry strategies. We argue that other firms’ experiences reduce investment barriers arising from formal and informal institutional environments in host countries that are dissimilar from an MNE’s home country, thereby encouraging new entry. Our empirical analysis of foreign entries by Japanese public manufacturing firms over more than a thirty-year period indicates that the prior experiences of other firms in a host country mitigate the negative effect of formal and informal institutional distance on entry decisions: as other firms’ experiences in a host country increase, a firm is less deterred by greater institutional distance from entering the country. We also find that the distance-mitigating effect of other firms’ experiences in different industries is less significant when a larger body of same-industry firm experience exists in a country, implying a substitution effect between different types of vicarious experience.
Abstract: We examine how firms use political strategies to protect economic rents created by mergers and acquisitions against dissipation by regulators. In regulated industries, regulators can impose costly merger conditions, for instance consumer rate reductions in the utilities sector, thereby reducing shareholder gains. We investigate empirically whether and how firms use election campaign contributions to politicians as a method of influencing regulatory merger approvals. In a statistical analysis of campaign contributions by all electric utilities from 1998-2006, we find that utilities increased their contributions in the year before they announced a merger, and that merging utilities increased their contributions more in states with greater political party competition. Our findings contribute to political strategy research by providing novel evidence that firms integrate market and nonmarket strategies.
Abstract: A challenge for energy firms when considering new investments is to balance expected financial gains against potential risks. However, while investment opportunities in different jurisdictions are often straightforward to identify, the policy or regulatory risks for investors are more difficult to accurately ascertain. Here I provide a novel conceptual framework for how firms can assess regulatory risk that focuses on the institutional processes governing policy-making. Risks are lower - and policies will subsequently be more stable - in jurisdictions where regulatory agencies have greater autonomy from politicians and where policies are formulated through more rigid’ policy-making processes. The contrasting development patterns of renewable energy policies in Ontario and Texas offer support for the framework. I further develop strategies for how firms can successfully manage regulatory risks in different types of environment.
Abstract: We argue that information asymmetries between regulators and firms increase the administrative decision costs of initiating new policies due to the costs of satisfying evidentiary or 'burden of proof' requirements. We further contend that regulators with better information about regulated firms - i.e. with lower information asymmetries - have lower decision costs, thereby facilitating regulator policy-making. To empirically test our predictions, we examine the relationship between regulatory informational environments and changes to regulated rates for all investor-owned electric utilities from 1980 to 2000. We exploit several natural sources of variation in the informational environments of U.S. state utility regulators. These stem from the prior experiences and administrative resources of regulators observable policy decisions of other regulatory agencies for a given utility and differences in procedural regulations pertaining to rate increases and decreases. Our results suggest that as regulators acquire more information about utility operations, including from experience in office, they are more likely to enact rate decreases and less likely to implement rate increases.
Abstract: Even though governments may adopt favourable regulatory policies for renewable power generation, their ability to encourage private sector investment depends also on the presence of regulatory governance institutions that provide credible long-term commitments to potential investors. In the case of Ontario we contend that, despite large market potential and comparatively strong regulatory incentive policies, weak regulatory governance is one factor that has accounted for the challenges in attracting and implementing large scale private investment in power generation at a reasonable cost. We find empirical support for our arguments in a unique survey of 63 wind power firms that assessed private sector opinions about the investment environment for renewable energy in Ontario. Compared to a range of factors, firms rated the stability of regulatory policy among the weakest aspects of Ontario’s business environment. However, policy stability ranked among the most important factors in firms’ assessments of the attractiveness of alternative jurisdictions in their location decisions. Subsequent interviews revealed that firms have responded to this risk in Ontario by explicitly pricing it into wind project financial models implying higher wind power prices for ratepayers and by directing investment funds to other jurisdictions. We argue that policy stability in Ontario may be improved by devolving greater decision-making authority to regulatory agencies in the energy sector and by strengthening their institutional independence.
Abstract: Whereas conventional wisdom holds that multinational firms (MNEs) invest less in host countries that pose greater policy risk-the risk that a government will opportunistically alter policies to expropriate an investing firm's profits or assets-we argue that MNEs vary in their response to host-country policy risk as a result of differences in organizational capabilities for assessing such risk and managing the policymaking process. We hypothesize that firms from home countries characterized by weaker institutional constraints on policymakers or greater redistributive pressures associated with political rent-seeking will be less sensitive to host-country policy risk in their international expansion strategies. Moreover, firms from home countries characterized by sufficiently weak institutional constraints or sufficiently strong redistributive pressures will seek out riskier host countries for their international investments in order to leverage their political capabilities, which permit them both to attain and defend attractive positions or industry structures. We find support for our hypotheses in a statistical analysis of the FDI location choices of multinational firms in the electric power generation industry during the period 1990 - 1999, the industry's first decade of internationalization.
Abstract: We employ the world polity perspective, together with insights from research on contentious politics, institutional change and other areas, to analyze the contentious domestic implementation of a globally diffusing policy. We argue that governments may respond to domestic contention over a recently enacted policy by retrenching-resurrecting the domestic political objectives suppressed in enactment on a case-by-case basis without formally repealing the policy-in order to balance domestic and global institutional forces favoring the policy's repeal, on the one hand, against their perception, rooted in world political culture, that the policy is a legitimating element of nationhood. At the domestic level, such forces include audience members' pre-existing cognitive constructs and normative belief structures as well as the level of broader political conflict. At the global level, these forces include the behavior and demands of relationally proximate global actors. Because the forces at both levels vary both by country and across time, retrenchment occurs unevenly and leads to heterogeneous policy outcomes, rather than the homogeneous outcomes traditionally emphasized in world polity research. We test our model of contentious implementation and retrenchment by examining the incidence of government renegotiation of the terms of private electricity generation projects during the period 1989 - 2001, the era of greatest ferment in the modern wave of neoliberal electricity reform. We find generally strong support for our hypotheses, which we test using several novel measures.
Abstract: We examine how regulated firms target their political strategies at multiple government institutions in order to gain more favorable regulatory agency decisions than would otherwise occur. By integrating the corporate political strategy and positive political theory literatures we derive propositions that (a) identify the political and regulatory circumstances that generate hostile environments from the firm's perspective, (b) delineate the conditions under which firms will employ an indirect strategy (i.e. target legislatures or executives) instead of a direct strategy (i.e. target regulators) to induce changes in regulator decisions and, importantly, (c) we identify the specific political institutions a firm will target when adopting (b). Even though our structured-interaction approach to the analysis of formal institutions is quite straightforward, we are able to develop a rich set of predictions about firms' political strategy that can form the basis for future empirical testing.
