Do private enterprises outperform state enterprises in an emerging market? The importance of institutional context in entrepreneurship

Boudreaux, Christopher (2019): Do private enterprises outperform state enterprises in an emerging market? The importance of institutional context in entrepreneurship.

Abstract

Do private-owned enterprises (POEs) outperform state-owned enterprises (SOEs) in an emerging market? Due to political and social connections, SOEs have several advantages over POEs in emerging markets and transition economies, but we hypothesize that these advantages wane in pro-market institutional environments that prioritize market competition, rule of law, and the rewards to profitable enterprise. In this study, therefore, we explore how institutional quality moderates the relationship between privatization and entrepreneurs’ sales performance. To do this, we blend agency theory and entrepreneurial cognition theory with insights from institutional economics to develop a model of emerging market venture performance. Using data from the World Bank’s Enterprise Survey of entrepreneurs in China, our results suggest that POEs outperform SOEs but only in environments with high-quality market institutions. In environments with low-quality market institutions, SOEs outperform POEs.

• Item Type: MPRA Paper
• Language: English
• Keywords: privatization, institutional quality, entrepreneurship, China, agency theory, entrepreneurial cognition theory
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L26 - Entrepreneurship; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics; P - Economic Systems > P1 - Capitalist Systems > P12 - Capitalist Enterprises; P - Economic Systems > P2 - Socialist Systems and Transitional Economies

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