Vol.:(0123456789) European Journal of Law and Economics https://doi.org/10.1007/s10657-020-09663-5 1 3 The impact of regulation on private security industry dynamics Glenn Scheerlinck 1  · Caroline Buts 1  · Marc Cools 2,3  · Genserik Reniers 4 © Springer Science+Business Media, LLC, part of Springer Nature 2020 Abstract As the amount of regulation continues to increase and private security frms play a more and more vital role in a modern society’s security, policy makers and practi- tioners 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 secu- rity 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 frm birth rate, frm death rate and frm survival rate, an instrumental variable approach is employed in a panel data random efect models, covering the period from 2013 to 2017. As regulation increases, we document a decrease in frm birth rate, frm death rate as well as frm survival rate of recent newcomers. Regarding frm birth rate and death rate, we document a gradually decreasing impact of older regulation. How- ever, while additional regulation negatively afects survival rate, we fnd 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 Classifcation L51 · K23 * Glenn Scheerlinck glenn.scheerlinck@vub.be 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