Emergence of Electricity Utilities: Agglomeration Externalities and Industry Dynamics

Prior studies highlight a trade-off between Marshallian and Jacobean agglomeration externalities in fostering new firms, yet their interaction and evolution alongside industry dynamics are less understood. This study examines the emergence of electricity utilities from 1985 to the present, analyzing 962 regions across 14 European countries. Findings reveal that while both externalities were crucial during early liberalization phases, their interaction initially hindered firm entry, with effects diminishing over time. Additionally, the study underscores the importance of green policies in supporting sector growth.