I’ve also been working to get a paper out for the International Society for New Institutional Economics conference in September. This paper is the first in a new project on how the petroleum refining industry responds to regulatory change, so this paper essentially lays out the conceptual argument and marks out the path that I want to follow on the project.
The title of the paper is “Environmental Regulation and the Transactional Boundary of the Firm: Regulatory Change, Vertical Integration, and Firm Profitability in Petroleum Refining, 1990-2001”. Here’s an excerpt from the conclusion:
The mergers and consolidation seen in the petroleum refining industry in the late 1990s are the transactional manifestation of firm attempts to regain economies of scale after the imposition of new regulations in the CAAA [Clean Air Act Amendments of 1990]. The fuel regulations in the CAAA introduced market fragmentation in motor gasoline, and this fragmentation undercut economies of scale in petroleum refining. Relative to pre-CAAA, the regulations could constrain refiners away from their previous minimum efficient scales of production. Organizational change through horizontal mergers of vertically integrated firms offered refiners a more profitable alternative than switching production within refineries. The imposition of external constraints increased the value of production and organizational flexibility that vertical integration allows.