How SOEs succeed in privatization: net political benefits and learning in networks

Abstract

PurposeDrawing on population ecology and net political theory, the purpose of this paper is to examine the influence of representative institutions (net political benefits (NPB)) on the success rates of privatization adopted by state‐owned enterprises (SOEs) and their learning curve during the process.Design/methodology/approachThe author focuses on the privatization of SOEs listed in China and employs the social network with event‐history analysis (survival analysis).FindingsThe results demonstrate that the determinants of NPB increase the success rates of privatization, while SOEs learn from two perspectives: private firms and other privatizing SOEs within the same population. In particular, I suggest that the outdegree market location network centrality before privatization, as well as the indegree centrality after privatization, both positively moderate the relationship between learning processes and the success rate of SOEs' privatization.Practical implicationsMore precisely, institutions are factors that not only determine the choice of SOEs to privatization, but also the success of this strategy. The finding will encourage government administrations, both central and local, to promote the development of institutions in order to facilitate market transactions. Implications for firms might be the learning mechanisms discovered in this research. When firms adopted the strategy of privatization, they could choose two sources of learning: private firms within the same industry and others who were implementing the same strategy.Originality/valueThe contribution of the paper is, its synthesis of institutional and ecological perspectives and research on privatization in emerging markets and organization learning in networking. Theoretically, the author extends the privatization literature into a worldly context with a combination of institution and organization learning theory. Empirically, with the application of network perspective and survival analysis, the author uncovered and carefully examined the learning mechanism in the process of privatization.