The state strikes back: industrial policy, regulatory power and the divergent performance of telefonica and telecom Italia

ABSTRACT

Contributing to the debate on the state’s role in helping domestic firms to internationalise, this paper compares the divergent performance of the Italian and Spanish telecommunications incumbents Telefonica and Telecom Italia (TI). Telefonica has grown since the early 1990s to become one of the largest telecommunications utilities worldwide, while TI is now a small firm controlled by the French media group Vivendi. This divergence occurred even though both the Italian and Spanish government implemented an activist industrial policy strategy aimed at favouring the internationalisation of, respectively, TI and Telefonica. The paper shows how these contrasting outcomes can be traced to the different regulatory power relationship between the state and domestic blockholders in the two countries. The findings shed light on the factors that lie behind the successful internationalisation of inward-looking firms active in regulated sectors.

KEYWORDS:

• European Union
• industrial policy
• Italy
• privatisations
• Spain
• telecommunications

Acknwoledgements

I would like to thank Pepper Culpepper, Joe Ganderson, David Levi-Faur, Jacint Jordana, Gerhard Schnyder, participants to the 2017 ECPR Joint Sessions of Workshops held in Nottingham 25–30 April 2017 and to the SASE 29th Annual Meeting held in Lyon 29 June-1 July 2017, three anonymous reviewers and the editors of JEPP for useful feedback.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Fabio Bulfone is research associate at the Robert Schuman Centre for Advanced Studies of the European University Institute.

Notes

1. The Centre-Left government was divided on the issue of the Olivetti takeover. The Treasury, which had managed TI’s privatisation, and former Prime Minister Prodi opposed the deal.

2. In fact, at the time of Telefonica’s privatisation the PP had placed the politically close Francisco Gonzalez at the head of the state-owned bank Argentaria, while La Caixa supported the government because the PP had formed a minority government with the support of the Catalan Nationalist Party.