Institutional constraints and organizational changes: the case of the British rail reform

This paper analyzes how institutional constraints determine organizational choices and investments decisions. More precisely, we examine how private parties adjust when policymakers impose a mode of organization with no or very little consideration for some major characteristics of the transactions that arrangement is intended to support. Our analysis uses original data related to the reform of the British rail industry. Notwithstanding their specific aspects, the problems raised by the radical transformation of this sector in the mid-1990s carry important lessons about what happens when a misaligned arrangement is implemented in a context that requires interfirm coordination.