Privatization, Governance Structures, and Trade Union Strength in Africa: A Transaction Cost Perspective

Abstract

When governments divest, stakeholders such as trade unions are affected. So, does the governance of privatization transactions vary according to the strength of trade unions? Governments of strong trade union countries are likely to adopt particular governance modes (e.g., internal), while those of weak union countries are likely to adopt other modes (e.g., external) for privatization transactions. Using transaction cost theory, the author found that trade union strength moderated the relationship between human asset specificity and mode of governance in a multilevel study of 1254 privatization transactions from 41 African countries. Governments of strong trade union countries were more likely to adopt internal governance modes given high asset specificity, while those of weak trade union countries were more likely to adopt external governance modes. Implications for privatization management and trade unions are discussed.