Politics and Infrastructure Investment

48 Pages Posted: 19 Aug 2000

See all articles by Bennet A. Zelner

Bennet A. Zelner

Duke University's Fuqua School of Business

Witold J. Henisz

University of Pennsylvania - Management Department

Date Written: September 7, 2000


What is the impact of political "interference" on a nation's level of infrastructure investment? Existing research on both private and state-owned enterprises (SOEs) appears to offer somewhat contradictory insights on this point. In some cases, additional constraints that limit the ability of political actors to "interfere" are hypothesized to increase investment levels, while in others the effect is hypothesized to be negative. We argue that these seemingly contradictory conclusions are in fact special cases of a more general phenomenon whereby the constraints that political institutions impose on political actors interact with political actors' electoral objectives, which are in turn determined by the political strength of the investing entity's "interest group competitors." Thus, the probability of change in the policy regime interacts with the expected direction of a policy shift to determine the investment level. Our econometric analysis, which uses a panel data set covering the electric utilities of 78 countries during the period 1970 ? 1994, is consistent with these hypotheses and consequently points to the potential for a more general theory regarding the impact of political institutions on investment in the private and public sectors.

Note: Previously titled "Political Constraints, Interest Group Competition and Infrastructure Investment in the Electric Utility Industry: A Cross-national Study"

Keywords: Electricity, Institutional Environment, Investment, Non-Market Strategy, Regulation

JEL Classification: L94, L32, F21

Suggested Citation

Zelner, Bennet A. and Henisz, Witold Jerzy, Politics and Infrastructure Investment (September 7, 2000). Available at SSRN: https://ssrn.com/abstract=236940 or http://dx.doi.org/10.2139/ssrn.236940

Bennet A. Zelner (Contact Author)

Duke University's Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States

Witold Jerzy Henisz

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
215-898-0788 (Phone)
215-898-0401 (Fax)

HOME PAGE: http://www-management.wharton.upenn.edu/henisz/

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