Acquisition, efficiency and scale economies – an analysis of the British bus industry.

Cowie, Jonathan (2002) Acquisition, efficiency and scale economies – an analysis of the British bus industry. Transport Reviews, 22 (2). pp. 147-157. ISSN 0144-1647

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The British Bus industry has undergone considerable transformation since privatization. Five major operators have emerged to dominate the market, a position almost exclusively attained through acquisition. This paper reviews the economies of scale argument commonly cited for this change and gives an overview of the acquisition process. It questions whether this argument gives a complete explanation for this industry development. For 58 individual companies, the level of technical efficiency attributable to firms operating at or near the optimum level of output is examined over 5 years to determine if mergers in practice have resulted in scale economies. Technical efficiency is estimated using data envelopment analysis, under assumptions of constant and variable returns to scale. Efficiency scores are then regressed on a time trend and a merger dummy to test whether acquired firms' efficiency has significantly improved above the average. It was found that over the period, efficiency had improved. This improvement, however, cannot be wholly attributed to the achievement of economies of scale. More specifically, there has been an improvement in the internal efficiency of acquired firms and some scale economies within group companies, the latter of which may have resulted from the eradication of competition.

Item Type: Article
Print ISSN: 0144-1647
Electronic ISSN: 1464 5327
Uncontrolled Keywords: Bus companies; Private sector; Amalgamations; Economies of scale; Technical efficiency gains; Management efficiency gains;
University Divisions/Research Centres: Faculty of Engineering, Computing and Creative Industries > School of Engineering and the Built Environment
Dewey Decimal Subjects: 600 Technology > 620 Engineering > 620 Engineering & allied operations
300 Social sciences > 380 Commerce, communications & transportation > 388 Transportation; ground transportation
600 Technology > 650 Management & public relations > 658 General management
Library of Congress Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HE Transportation and Communications
T Technology > TL Motor vehicles. Aeronautics. Astronautics
Item ID: 1892
Depositing User: RAE Import
Date Deposited: 27 Feb 2008 10:18
Last Modified: 28 Jun 2013 08:38

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