IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/109830.html
   My bibliography  Save this paper

Towards a framework to understand the relative performance of state-owned firms

Author

Listed:
  • Estrin, Saul

Abstract

This paper considers the factors influencing the comparative performance of state-owned and privately-owned enterprises (SOE/POE). The economics literature has argued that firm performance is influenced by governance arrangements, leading to expectations of inferior performance from SOEs. Meanwhile, a political economy literature classifies countries according to the model of state engagement, which also has implications for SOE performance. We combine these two frameworks to provide a taxonomy. The first framework relating to governance concerns the relationship between owners and managers, the relationship between large and small owners, and the functioning of the managerial labour market. The second framework considers three types of model of state engagement: the Welfare State, the Developmental State, and the Predatory State. Each of the six resulting taxonomies yields distinct outcomes in terms of SOE versus POE performance. 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 Developmental States with strong governance, SOEs may outperform POEs if they can benefit from superior state resources.

Suggested Citation

  • Estrin, Saul, 2020. "Towards a framework to understand the relative performance of state-owned firms," LSE Research Online Documents on Economics 109830, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:109830
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/109830/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Estrin, Saul & Meyer, Klaus E. & Nielsen, Bo B. & Nielsen, Sabina, 2016. "Home country institutions and the internationalization of state owned enterprises: A cross-country analysis," Journal of World Business, Elsevier, vol. 51(2), pages 294-307.
    2. Robert E. Hoskisson & Mike Wright & Igor Filatotchev & Mike W. Peng, 2013. "Emerging Multinationals from Mid-Range Economies: The Influence of Institutions and Factor Markets," Journal of Management Studies, Wiley Blackwell, vol. 50(7), pages 1295-1321, November.
    3. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
    4. Mehrdad Vahabi, 2016. "A positive theory of the predatory state," Public Choice, Springer, vol. 168(3), pages 153-175, September.
    5. Estrin, Saul & Prevezer, Martha, 2011. "The role of informal institutions in corporate governance: Brazil, Russia, India, and China compared," LSE Research Online Documents on Economics 33552, London School of Economics and Political Science, LSE Library.
    6. Estrin, Saul & Perotin, Virginie, 1991. "Does ownership always matter?," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 55-72, March.
    7. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    8. Anthony J. Venables, 2016. "Using Natural Resources for Development: Why Has It Proven So Difficult?," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 161-184, Winter.
    9. Estrin, Saul & Pelletier, Adeline, 2018. "Privatization in developing countries: what are the lessons of recent experience?," LSE Research Online Documents on Economics 87348, London School of Economics and Political Science, LSE Library.
    10. Caves, Douglas W & Christensen, Laurits R, 1980. "The Relative Efficiency of Public and Private Firms in a Competitive Environment: The Case of Canadian Railroads," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 958-976, October.
    11. Michael A Witt & Arie Y Lewin, 2007. "Outward foreign direct investment as escape response to home country institutional constraints," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 579-594, July.
    12. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
    13. Megginson, William Leon, 2005. "The Financial Economics of Privatization," OUP Catalogue, Oxford University Press, number 9780195150629.
    14. Julian Franks & Colin Mayer, 1997. "Corporate Ownership And Control In The U.K., Germany, And France," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(4), pages 30-45, January.
    15. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    16. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
    17. Megginson, William L., 2017. "Privatization, State Capitalism, and State Ownership of Business in the 21st Century," Foundations and Trends(R) in Finance, now publishers, vol. 11(1-2), pages 1-153, November.
    18. Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel, 2003. "Seize the state, seize the day: state capture and influence in transition economies," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 751-773, December.
    19. Tarun Khanna & Yishay Yafeh, 2007. "Business Groups in Emerging Markets: Paragons or Parasites?," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 331-372, June.
    20. Michael N. Young & Mike W. Peng & David Ahlstrom & Garry D. Bruton & Yi Jiang, 2008. "Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective," Journal of Management Studies, Wiley Blackwell, vol. 45(1), pages 196-220, January.
    21. Trevor Buck & Xiaohui Liu & Rodion Skovoroda, 2008. "Top executive pay and firm performance in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(5), pages 833-850, July.
    22. Alvaro Cuervo-Cazurra & Andrew Inkpen & Aldo Musacchio & Kannan Ramaswamy, 2014. "Governments as owners: State-owned multinational companies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(8), pages 919-942, October.
    23. Alvaro Cuervo-Cazurra, 2018. "Thanks but no thanks: State-owned multinationals from emerging markets and host-country policies," Journal of International Business Policy, Palgrave Macmillan, vol. 1(3), pages 128-156, December.
    24. Berglof, Erik & Claessens, Stijn, 2004. "Enforcement and Corporate Governance," Policy Research Working Paper Series 3409, The World Bank.
    25. Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
    26. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    27. Sergio Mariotti & Riccardo Marzano, 2019. "Varieties of capitalism and the internationalization of state-owned enterprises," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(5), pages 669-691, July.
    28. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-368, June.
    29. Saul Estrin & Adeline Pelletier, 2018. "Privatization in Developing Countries: What Are the Lessons of Recent Experience?," The World Bank Research Observer, World Bank, vol. 33(1), pages 65-102.
    30. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    31. Igor Filatotchev & Gregory Jackson & Chizu Nakajima, 2013. "Corporate governance and national institutions: A review and emerging research agenda," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 965-986, December.
    32. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, April.
    33. Pranab Bardhan, 2016. "State and Development: The Need for a Reappraisal of the Current Literature," Journal of Economic Literature, American Economic Association, vol. 54(3), pages 862-892, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Lazzarini,Sergio G., 2022. "The Right Privatization," Cambridge Books, Cambridge University Press, number 9781316519714.
    3. Estrin, Saul & Meyer, Klaus E. & Nielsen, Bo B. & Nielsen, Sabina, 2016. "Home country institutions and the internationalization of state owned enterprises: A cross-country analysis," Journal of World Business, Elsevier, vol. 51(2), pages 294-307.
    4. Mike W. Peng & Garry D. Bruton & Ciprian V. Stan & Yuanyuan Huang, 2016. "Theories of the (state-owned) firm," Asia Pacific Journal of Management, Springer, vol. 33(2), pages 293-317, June.
    5. Estrin, Saul & Liang, Zhixiang & Shapiro, Daniel & Carney, Michael, 2018. "State capitalism, economic systems and the performance of state owned firms," LSE Research Online Documents on Economics 91944, London School of Economics and Political Science, LSE Library.
    6. Christian Wolf & Michael G. Pollitt, 2008. "Privatising national oil companies: Assessing the impact on firm performance," Working Papers EPRG 0805, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    7. Birgitte Grøgaard & Asmund Rygh & Gabriel R. G. Benito, 2019. "Bringing corporate governance into internalization theory: State ownership and foreign entry strategies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1310-1337, October.
    8. Ruth V. Aguilera & Valentina Marano & Ilir Haxhi, 2019. "International corporate governance: A review and opportunities for future research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 457-498, June.
    9. Alvaro Cuervo-Cazurra & Anna Grosman & William L. Megginson, 2023. "A review of the internationalization of state-owned firms and sovereign wealth funds: Governments’ nonbusiness objectives and discreet power," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(1), pages 78-106, February.
    10. Cuervo-Cazurra, Alvaro & Li, Cheng, 2021. "State ownership and internationalization: The advantage and disadvantage of stateness," Journal of World Business, Elsevier, vol. 56(1).
    11. Yang, Wei & Meyer, Klaus E., 2019. "How does ownership influence business growth? A competitive dynamics perspective," International Business Review, Elsevier, vol. 28(5), pages 1-1.
    12. Villalonga, Belen, 2000. "Privatization and efficiency: differentiating ownership effects from political, organizational, and dynamic effects," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 43-74, May.
    13. Asmund Rygh & Gabriel R. G. Benito, 2022. "Governmental goals and the international strategies of state-owned multinational enterprises: a conceptual discussion," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(4), pages 1155-1181, December.
    14. Gong, Stephen X.H. & Cullinane, Kevin & Firth, Michael, 2012. "The impact of airport and seaport privatization on efficiency and performance: A review of the international evidence and implications for developing countries," Transport Policy, Elsevier, vol. 24(C), pages 37-47.
    15. Pei Sun & Jonathan P. Doh & Tazeeb Rajwani & Donald Siegel, 2021. "Navigating cross-border institutional complexity: A review and assessment of multinational nonmarket strategy research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1818-1853, December.
    16. Germà Bel, 2010. "Against the mainstream: Nazi privatization in 1930s Germany1," Economic History Review, Economic History Society, vol. 63(1), pages 34-55, February.
    17. A. Asquer, 2014. "Explaining Partial Privatization Of Public Service Provision: The Emergence Of Mixed Ownership Water Firms In Italy (1994–2009)," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(1), pages 11-30, March.
    18. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.
    19. Ahmed Aboud & Ahmed Diab, 2022. "Ownership Characteristics and Financial Performance: Evidence from Chinese Split-Share Structure Reform," Sustainability, MDPI, vol. 14(12), pages 1-18, June.
    20. Mathur, Ike & Banchuenvijit, Wanrapee, 2007. "The effects of privatization on the performance of newly privatized firms in emerging markets," Emerging Markets Review, Elsevier, vol. 8(2), pages 134-146, May.

    More about this item

    Keywords

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

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J1 - Labor and Demographic Economics - - Demographic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:109830. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.