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

Saul Estrin

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: firm performance; governance; institutions; model of state engagement; state-owned firms (search for similar items in EconPapers)
JEL-codes: J01 J1 R14 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2020
New Economics Papers: this item is included in nep-bec
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Published in Economic Annals, 2020, 65(225), pp. 11 - 31. ISSN: 0013-3264

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