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Path dependence in strategic investment decisions of energy companies

abstract The research project "path dependence in strategic investment decisions of energy companies” investigates different renewable energy investment strategies of utility companies. It aims at researching different internal and external variables that explain the underlying reasons for investment choices of utility companies.

After a decade-long focus of utilities on fossil fuels such as coal, gas and nuclear energy, we currently experience a significant reorientation in the energy market. While some utilities continue depending on a traditional path and push for higher investments in fossil energies, some of their peers have changed their strategy and increasingly invest in renewable energies such as wind, solar, biomass and hydropower.
The Spanish company Iberdrola is an example for how a utility companies can separate from its path dependency and innovate its strategy. 20 years ago Iberdrola was a classical energy provider with a strong focus on fossil fuels. Due to a bold strategic reorientation and a positive external market environment, the Renewable Energy Division Iberdrola Renovables is the largest operator of Wind farms worldwide today.

In central Europe innovation in the energy market is often initiated by visionary small and medium-sized companies; supported by proactive policies changes. Large energy companies, however, were until recently reluctant to significantly investments in renewable energy and focused their great resources on traditional paths. What are the underlying reasons for this investment strategy? What internal and external factors influence investment decisions in utility companies? How did other energy companies successfully manage the shift towards more renewable energy and what can today's managers learn from them? These and other economically and socially relevant questions are researched in this study.

Therefore different investment strategies and organizational structures of large utilities are analyzed with regard to renewable energies in a first step. In addition to the highlighting of the differences in strategies, a special focus is laid on understanding the influencing factors for an investment choice. There we further research what influence different organizational structures have on the success of renewable energy management. Are energy companies with a largely autonomous and geographically separate division for renewable energies more successful than companies with a centralized organization and management hierarchies? Multi-case studies should shade some light on these questions. From the results of the research, recommendations are derived and connected to practice through a close cooperation with energy companies. The results of the studies will be published in academic journals.
   
keywords Renewable Energies, Strategic Management, Institutional Theory, Path Dependence, Decision-Making, Change Management, Organizational Design, Utility firms
   
partner Stiftung Nagelschneider - Erforschung Nachhaltiger Energien
type dissertation project
status ongoing
start of project 2011
end of project 2013
additional informations
topics Renewable Energies, Strategic Management, Institutional Theory, Path Dependence, Decision-Making, Change Management, Organizational Design, Utility firms
methods Quantitative Research Methods
contact Elmar Friedrich