The impact of regulation on private security industry dynamics
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The impact of regulation on private security industry dynamics Glenn Scheerlinck1 · Caroline Buts1 · Marc Cools2,3 · Genserik Reniers4
© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract As the amount of regulation continues to increase and private security firms play a more and more vital role in a modern society’s security, policy makers and practitioners acknowledge the need for sound research. Moreover, studying regulation and private security industry dynamics can enable a better alignment of regulation to its objectives, namely to control abusive and corrupt conduct of some private security companies and to improve the professionalism of the industry. Using novel data on the width and the restrictiveness of private security regulation and data on firm birth rate, firm death rate and firm survival rate, an instrumental variable approach is employed in a panel data random effect models, covering the period from 2013 to 2017. As regulation increases, we document a decrease in firm birth rate, firm death rate as well as firm survival rate of recent newcomers. Regarding firm birth rate and death rate, we document a gradually decreasing impact of older regulation. However, while additional regulation negatively affects survival rate, we find no impact of older regulation on company survival. Incumbents clearly gain an advantage from lobbying to increase regulation and consequently raising barriers to entry. Keywords Private security · Regulation · Industry dynamics · European Union JEL Classification L51 · K23
* Glenn Scheerlinck [email protected] 1
Department of Applied Economics, Vrije Universiteit Brussel, Brussels, Belgium
2
Institute for International Research on Criminal Policy, Ghent University, Ghent, Belgium
3
Department Crime and Society, Vrije Universiteit Brussel, Ghent, Belgium
4
Faculty of Technology, Policy and Management, Delft University of Technology, Delft, The Netherlands
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Vol.:(0123456789)
European Journal of Law and Economics
1 Introduction All EU Member States possess national regulation to define, steer and control the activities of private security firms and their personnel. Even if regulation as well as the practical application differs considerably from country to country, the main reasons for regulation and goals its are largely identical. The reasons and goals can be grouped into three main categories (Hakala 2008; Button and Stiernstedt 2016; Born et al. 2007; Klein and Hemmens 2016; McCrie 2017; Leloup 2019). Firstly, there are the constitutional requirements, such as protection of human rights, maintaining the state monopoly on the fight against crime and defining the division of labour between private and public security. Second, there are public interest requirements, such as guaranteeing security providers’ accountability and control of armed private security. Thirdly, there are professional requirements, eliminating potential ‘cowboy’ companies by setting minimum quality and ethical standards for the organisation in train
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