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Towards A Framework To Understand The Relative Performance Of State-Owned Firms

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  • Saul Estrin

Abstract

This paper considers the factors influencing the comparative perfor-mance of state-owned and privately-owned enterprises (SOE/POE). The economics lit-erature has argued that firm performance is influenced by governance arrangements, leading to expectations of inferior perfor-mance from SOEs. Meanwhile, a political economy literature classifies countries ac-cording to the model of state engagement, which also has implications for SOE perfor-mance. We combine these two frameworks to provide a taxonomy. The first framework relating to governance concerns the rela-tionship between owners and managers, the relationship between large and small own-ers, and the functioning of the managerial labour market. The second framework con-siders three types of model of state engage-ment: the Welfare State, the Developmental State, and the Predatory State. Each of the six resulting taxonomies yields distinct out-comes in terms of SOE versus POE perfor-mance. In all models, SOEs perform better in a better governance environment than in a worse governance environment, and this ranking is the same in Welfare States and Predatory States. However, in Devel-opmental States with strong governance, SOEs may outperform POEs if they can benefit from superior state resources.

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  • Saul Estrin, 2020. "Towards A Framework To Understand The Relative Performance Of State-Owned Firms," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(225), pages 11-32, April – J.
    • Handle: RePEc:beo:journl:v:65:y:2020:i:225:p:11-32
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    More about this item

    Keywords

    state-owned firms; firm performance; governance; institutions; model of state engagement;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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