Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom

Belloc, Filippo (2013): Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom.

Abstract

A very well established economic literature maintains that State-owned enterprises (SOEs) are inefficient comparatively to privately-owned ones (POEs). In this paper we argue that SOEs' inefficiency is not due to the State ownership per se, rather it is caused by some conditions other than ownership which SOEs often, but not necessarily, relate to. In particular, we 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. We suggest that targeted measures aimed at increasing managers' commitment to long-term investment strategies and at reducing corruption and political interference, though being complex and difficult to implement, can be much more (positively) incisive 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.

• Item Type: MPRA Paper
• Language: English
• Keywords: State-owned enterprises; innovation; privatization.
• Subjects: H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L33 - Comparison of Public and Private Enterprises and Nonprofit Institutions ; Privatization ; Contracting Out; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; P - Economic Systems > P1 - Capitalist Systems > P12 - Capitalist Enterprises

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