Indian State-owned Enterprises Research Articles

Understanding the internationalization of Indian state-owned enterprises

ABSTRACT The article examines the global activities of high-value Indian state-owned enterprises (SOEs) classified by the government as “Maharatnas” and “Navratnas.” Using the FESPET framework, the paper assesses their performance and international presence, revealing their commitment to a public mission beyond financial gains. These SOEs prioritise social spending and often surpass regulatory environmental targets, serving as valuable assets in India and globally. Profitable SOEs demonstrate positive impacts abroad, while financially unsustainable ones fall short in contributing to the non-financial “ESPET” dimension.

Board Composition and Performance of Indian State-owned Enterprises: Moderating Role of Leverage

Debt holders monitoring influence on the business performance has been noted in several research. Another body of research investigates the board of directors and performance linkages. The impact of debtholders on the board composition and firm performance linkage, particularly in State-Owned Enterprises (SOEs), has received little attention in the literature. As a result, this article aims to determine whether the composition of Indian SOE boards has an impact on their performance. It also looks into how leverage influences the association between the composition of Indian SOE boards and their performance. From 2001 to 2019, the panel data regression is performed on 19 Indian SOEs registered on the Bombay Stock Exchange. According to the study, board size, nominee directors improve Indian SOE performance, while independent directors reduce performance. Furthermore, in high-leverage SOEs, board of directors’ supervision is reduced or removed. The findings have implications for policymakers and the government.

Human Resource Metrics for Enhancing Organizational Performance: Case of Indian State-owned Enterprises

As a result of a growing concern regarding agility, Human Resources (HR) has become one of the most challenging fields of management. State-owned enterprises (SOEs) face people-related issues, from attracting talent to managing performance, while creating employee experience. This article is an attempt to explore the pattern of usage of the HR metrics in Indian SOEs and to examine other metrics that need to be included as part of a strategic HR approach to enhance organizational performance. Primary data was collected using formal interviews with HR executives. The outcomes suggest that Indian SOEs are in the infancy stage when it comes to the adoption of HR metrics. It is important that Indian SOEs initiate the first-level of HR metrics and thereafter make planned progress to the third-level impact. Based on the study, a framework for sustainable and competitive HR is proposed. All of this has implications for SOEs in developing countries. JEL Codes: M12

AMBIDEXTROUS INNOVATION IN STATE-OWNED ENTERPRISES IN INDIA: THE ROLE OF NEW ENTRANTS, TECHNOLOGICAL DISCONTINUITY, AND KNOWLEDGE NETWORKS

This study examines the effects of competitive pressure by new entrants and technological discontinuity on the strategic innovations adopted by incumbent state-owned enterprises (SOEs) in India. Due to government ownership, these firms are dominant players domestically and their market leadership is challenged by new entrants. Technological discontinuity challenges technology leadership. Incumbent firms develop knowledge networks by working with partners, suppliers, and buyers. The incumbent firms must strike a balance between the exploitation of current technology and the exploration of new technology. This study aims to understand the effect of new entrants and technological discontinuity on the exploitation and exploration strategies of Indian SOEs in the manufacturing sector. The quantitative analysis is carried out using partial least squares structural equation modeling. For Indian SOEs, the technological discontinuity does affect exploitation and exploration, but new entrants have no such effect. The study confirms the moderating effect of knowledge networks on exploitation.

Competitive Pressure and the Moderating Role of the Knowledge Network on Internationalization Intent of Indian State-owned Enterprises

The incumbent State-owned Enterprises (SOE) are dominant players in the home markets. New entrants’ arrival challenges the SOEs’ market dominance while the technology discontinuity challenges the technical leadership by obsoleting the existing technology. This study focuses on the effect of these competitive pressures on the internationalization intent of the Indian SOEs. The incumbent firms develop a knowledge network in technical and market aspects by working with the partners, the suppliers and the buyers. The study also focuses on the moderating effect of the knowledge networks. This study uses structured equation modelling using the partial least squares technique as the analytical technique. The results confirm the positive effect of technological discontinuity on the internationalization intent. In contrast, new entrants had no such effect. The study also confirms the positive moderating influence of the knowledge network on the effect of technological discontinuity on the internationalization intent.

Developing A Corruption-Vulnerability Index for Organizations: A Study of Indian State-Owned Enterprises

This is a scholar-practitioner effort to develop a tool for assessing the anti-corruption preparedness of organizations. This study aims to develop an index to measure corruption vulnerability of organizations, drawn from an extensive review of the literature, field data from state-owned enterprises, and qualitative data through interviews with practitioners and domain experts. Extant literature and practitioner studies indicate the absence of a framework which works in an ex-ante, preventive mode to analyze organizations in terms of the preparedness of their systems and routines against organizational corruption. We examined paradigms that are considered moderators and precursors to organizational corruption. Drawing on existing theory we identified certain core Ethics Resources (ERs) of organizations and argue that these are the fountainheads of ethical behavior in an organization. These variables were linked with data on real-life corruption cases in state-owned enterprises (SOEs) drawn from a national-level oversight body, to develop the conceptual framework. Thereafter, using semi-structured interviews with practitioners and through the assistance of domain experts we constructed from this framework, a Corruption Vulnerability Index. Finally, using a structured instrument administered to a sample of vigilance officers from SOEs, we tested the index in 46 organizations. The result is a predictive and preventive tool that can be used by top managements, oversight bodies, and industry associations to predict vulnerability of organization systems and routines to misuse and abuse; and to compare and grade various organizations on this count. Streams for continued research and practice are identified.

Compulsory Corporate Social Responsibility: An Empirical Assessment of Managerial Perspective in Indian State Owned Enterprises

In 2013, India became the first country to introduce a statutory requirement on businesses to engage in compulsory corporate social responsibility (CSR), providing a unique setting for researching challenges and impact of largescale compulsory CSR implementation. Any Indian corporation which had an annual turnover of more than 10 billion rupees was mandated to spend ‘at least two percent of the average net profits […] made during the three immediately preceding financial years.’ (Section 135, Companies Act 2013). Around 6,000 companies are thought to be affected by the new regime (Indian Institute of Corporate Affairs, 2012). This research examines the managerial perspective on changes to the design, experience and practice of CSR initiatives within SOEs in India. Before 2013, these SOEs engaged with local charities in a loose, unstructured and ad-hoc manner to conduct its CSR. Most of the focus was on providing donations to local educational institutions and regional social welfare organisations. However, with the advent of 2013 regulations SOEs had to completely alter their CSR regime to make it more structured, impact focussed, policy driven and functional. We have interviewed approximately 50 executives and directors from the top 40 Indian SOEs by revenue over a two years period (2015-16) to understand how the companies are adapting to the new regulations and what changes if any have been made. We find that while mandatory provisions do increase compliance burden, it does also provide a specific amount of money which needs to be spent and a structured and accountable way to do so. Our calculations show that under the new regulations Indian SOEs have to spend around 30 billion Indian Rupees per annum. This creates a tremendous opportunity for the businesses to invest in socially relevant enterprises and to internalise externalities.

Organizational culture as a moderator between affective commitment and job satisfaction

PurposeThe purpose of this paper is to investigate the moderating role of organizational culture in affective commitment and job satisfaction relationship.Design/methodology/approachResponses were collected from 712 employees working in nine different Indian central public sector enterprises /state-owned enterprises (SOEs) by using a questionnaire-based survey. Theoretical analysis is based on social exchange theory and managerial grid theory. Data were analyzed by using partial least squares structural equation modeling.FindingsThe establishment of organizational culture as a moderator in Indian organizations is unique. This study has utilized data from employees working in different departments of organizations to provide unbiased responses. The results demonstrate that impact of affective commitment on employees’ job satisfaction is moderated by supportive and innovative cultures. Additionally, this research also proves that bureaucratic culture does not play a crucial role in moderating the relationship between organizational commitment and employees’ job satisfaction.Research limitations/implicationsResults are relevant to top-level and middle-level management in which people are involved in the governance of the organization, both directly and indirectly. There should be fixed working hours and optimum time management. Due to growing pressure, few employees who have personal obligations toward their families, such as nursing mothers and stressed individuals, should be provided with flexible working hours. In this way, culture can become supportive to cater to different needs of employees.Originality/valueTill date, organizational culture as moderator has received very less attention in India. The establishment of organizational culture as a moderator in Indian SOEs is unique. The results add to the growing literature of commitment from non-western context as this study is based on Indian samples. This study has utilized data from employees working in different departments of organizations to provide unbiased responses.

Can commercialization through partial disinvestment improve the performance of state-owned enterprises? The case of Indian SOEs under reforms

State-owned enterprises (SOEs) play an important role in an emerging economy, given that they are often the biggest employer as well as the largest contributor to the economy. In the past, privatization has been used as an important governance mechanism to reduce the inefficiency of SOEs. Notwithstanding all the benefits of privatization, it is not always a feasible option due to political and legal compulsions. This article investigates the impact of an important alternate reform programme, namely, partial disinvestment on the performance of SOEs and the major contingencies under which this relationship is likely to be affected. The study undertook multiple quadratic regressions, on an unbalanced panel data from 2001 to 2014 on a sample of 4774 observations belonging to 562 Indian SOEs. The results suggest that with initial disinvestment there is an initial improvement in performance, but with subsequent disinvestments, the SOE performance is seen to decline. The results indicate that, even without full privatization, moderate corporate governance reform is potentially an effective way of improving the performance of SOEs; such reforms represent an alternative for policymakers seeking to restructure SOEs without massive privatization. The study also finds that this variation in performance with state disinvestment efforts is contingent on the institutional holding in the firm and the competitive environment. Theoretical contributions to the emerging SOE literature and practical implications for the SOE managers are also discussed.

Corporate Governance, Institutional Ownership and Firm Performance in Indian State-owned Enterprises

Corporate governance norms were prepared with the assumption that the companies are controlled by private players. However, countries such as India also have listed firms that are majority owned by the state/government. The literature on corporate governance has highlighted the differences in the governance practices of the state-owned enterprises and private-owned enterprises. This article analyses the relationship between corporate governance practices of listed state-owned enterprises in India with institutional ownership and the firm performance. The article measures the corporate governance practices of the listed Indian state-owned firms through a standard instrument to arrive at corporate governance scores. The article first analyses the relationship of corporate governance scores with the firm performance measured through the profitability parameter. The results indicate that corporate governance and firm performance share a positive relationship, which is in line with the expectations. However, the relationship between corporate governance practices and institutional ownership is negative, indicating that increasing institutional ownership is negatively affecting the corporate governance practices of the state-owned firm. This result calls for further research in this area as it deviates from the results of the studies done in the context of family-owned firms.

Choice of Law in Public Procurement and Licensing: Exploring If the State Has, or Should Have, a Choice in the Matter

This short academic note explores certain elements of the controversies on application of India's legal frameworks on civil nuclear liability on foreign contractors engaged by Indian State-owned Enterprises, along with attendant constitutional and legal implications on non-application of domestic legal frameworks in such cases.

Do productivity and ownership really matter for growth? Firm-level evidence

Using data on Indian state-owned enterprises for 1987–2006, the paper examines the association between productivity, ownership and employment growth. After accounting for various firm level controls, the evidence indicates that firm growth improves primarily through passive learning, whereas higher levels of active learning appear to slow down firm growth, although the magnitude of these effects is economically small. Besides, the analysis suggests that ownership is significantly and non-linearly related to firm growth.

Partial Privatization and Firm Performance

Most privatization programs begin with a period of partial privatization in which only non-controlling shares of firms are sold on the stock market. Since management control is not transferred to private owners it is widely contended that partial privatization has little impact on firm behavior. This perspective ignores the role that the stock market can play in monitoring and rewarding managerial performance even when the government remains the controlling owner. Using data on the population of Indian state-owned enterprises we find that partial privatization has a positive and highly significant impact on firm sales, profits, and labor productivity.

Comparative Organizational Characteristics of Indian State-Owned Enterprises

This article evaluates the organizational characteristics, defined as returns to scale and most productive scale size, for a sample of 67 Indian state-owned enterprises in comparison with 63 private and 27 foreign-owned enterprises. State-owned units suffer from decreasing returns to scale with diseconomies being associated with their large size. The average most productive scale size of the state-owned firms is considerably smaller than average actual size, establishing the need for a break-up of existing units into many smaller units so as to gain efficiencies. A policy of restructuring these organizations before privatization will enable privatization to be eventually more successful.

An Assessment of the Performance of Indian State-Owned Enterprises

We examine the determinants of performance of 68 Indian state-owned enterprises in the manufacturing sector for a five-year period: 1987 to 1991. Relative performance is determined using data envelopment analysis, with variations in performance patterns subsequently explained using regression analysis. We note that the performance of firms in the Indian state-owned sector is characterized by both, low performance, as well as significant and systematic variations in the performance parameters. Size is positively associated and age negatively associated with efficiency. Further, economic liberalization and reforms aimed at improving the performance of state-owned firms induces efficiency gains over time. This heterogeneity within the state-owned sector has policy implications, which we discuss. In countries which have privatized large numbers of their state-owned firms, it is often the larger establishments which have been sold to the public. The state-owned firms in the manufacturing sector that can be candidates for privatization are the smaller and older manufacturing firms. These firms may also be easier to dispose of to private investors. This finding reinforces our central thesis that firm-level analysis within the state-owned sector is useful and important for generating pragmatic policy guidelines.

EVALUATING THE COMPARATIVE PERFORMANCE OF STATE OWNED ENTERPRISES AND PRIVATELY OWNED FIRMS: THE INDIAN EXPERIENCE.

This paper reports findings from a study comparing the performance of Indian State Owned Enterprises (SOEs) and private firms. While the privately held firms performed better in terms of commercial...

Performance Evaluation of State-Owned Enterprises in Theory and Practice

This study explores the goal orientation of state-owned enterprises (SOEs) with a view to develop a behavioral theory of SOEs. It is set in India, where as in many other countries the government expects SOEs to promote the “public interest” rather than maximize profits. The research design consisted in searching for patterns in the subjective evaluations of a set of Indian SOEs by critical environmental actors (senior bureaucrats and influential journalists). The study attempted to get at each respondent's “espoused theory” for performance evaluation as well as his or her “theory-in-use,” and compared both with official goals as well as the prescriptions of welfare economists. Five models of performance evaluation, varying in criteria and weighting schemes, were considered. The results showed—with surprising consistency—that commercial profitability was the most important criterion that explained bureaucrats' subjective evaluations. Lack of comprehensive information seemed to accentuate their reliance on profitability—but not by very much. For a minority of bureaucrats (Type 1), the more important explanation seemed to be their “incorrect” belief that SOEs could be judged like private firms, official policy notwithstanding. For the majority (Type 2), who espoused views consistent with official policy, the explanation seemed to be conceptual confusion or double standards. Both types also behaved as if they would like SOEs to maximize profitability rather than just break even or earn a reasonable return. Some of these findings were true for responding journalists as well. Given these results, managers of Indian SOEs can be expected to seek profits not only to reduce financial dependence on government but also to gain a measure of external legitimacy. Recognizing the importance of profitability as a criterion-in-use, they can be expected to propose strategies that would increase their firm's profitability and resist those that would reduce it, regardless of official goals. Where managers are free to act independently, profitability may prevail as the dominant decision criterion, but where they are not, the outcome may depend on more complex factors. More generally, the profit motive in SOEs may be as strong or stronger than it appeared to be in India in countries with (a) less sophisticated administrative systems or personnel; (b) an official ideology more to the right than in “socialist” India; and (c) a higher proportion of mixed enterprises. The paper concludes with the implications of these findings for the design of performance evaluation systems at the government-SOE interface.

Organization Form, Residual Claimants, and Corporate Control

EUGENE FAMA and Michael Jensen's treatment of the "Separation of Ownership and Control" is both insightful and informative. It deepens our understanding of corporate control, and the analysis of residual claimants usefully extends the economics of internal organization to include partnerships, mutuals, nonprofits, and the like. The basic argument is this: specialized governance structures arise in response to the efficiency needs of each type of organization. This is an important argument and one with which I broadly concur. They couple this, however, with a strong suggestion that these structures have reached a high degree of refinement-on which account there is not now, if indeed there ever has been, an organization control problem with which scholars and others are legitimately concerned. On this point I have grave doubts. My discussion of the paper addresses three issues: What is the relation, if any, of the hierarchical organization of the firm to economic performance? What relation, if any, does residual claimant status have to the composition and character of the board of directors? And is there now or has there ever been a corporate control problem? I deal with each of these issues in order.