The political economy of telecoms and electricity internationalization in the single market

Abstract

As a consequence of liberalization policies in the European Union (EU), a number of formerly inward-looking incumbents in telecommunications and electricity transformed themselves into some of the world's leading multinationals. The relationship between liberalization and incumbent internationalization, however, is contested. Three political economy arguments on this relationship are tested. The first claims that incumbents most exposed to domestic liberalization would internationalize most. The second asserts that incumbents operating where liberalization was restricted could exploit monopolistic rents to finance internationalization. The third argument claims that a diversity of paths will be adopted by countries and incumbents vis-à-vis liberalization and internationalization. Using correlation and cluster analysis of EU telecoms and electricity incumbent multinationals, evidence is found in favour of the third hypothesis. Internationalization as a response to liberalization took diverse forms in terms of timing and extent and this is best explained using a country, sector and firm logic.