Innovation in State-Owned Enterprises: Reconsidering the Conventional Wisdom

Filippo Belloc ()

Journal of Economic Issues, 2014, vol. 48, issue 3, 821-848

Abstract: A very well-established economic literature maintains that state-owned enterprises (SOEs) are inefficient as compared to privately owned ones (POEs). In this paper, I argue that SOEs' inefficiency is not due to state ownership per se, but is rather caused conditions other than ownership, to which SOEs often — though not necessarily always — relate. In particular, I focus on dynamic efficiency — specifically, the production of technological innovation — of SOEs in manufacturing industries, where SOEs should contend with POEs in a competitive environment. I suggest that targeted measures, which are aimed at increasing managers' commitment to long-term investment strategies and at reducing corruption and political interference — albeit complex and difficult to implement — can be much more (positively) impactful on long-run technical progress than the simple privatization of companies. This leaves room for exploration and implementation of policies that might reconcile state ownership and market competition in industrial sectors.

Date: 2014
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Working Paper: Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom (2014)
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DOI: 10.2753/JEI0021-3624480311

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